Banks Sue to Stop CFPB Arb Rule

Over a dozen U.S. banks and business groups sued the Consumer Financial Protection Bureau (CFPB) yesterday in an effort to block a new arbitration rule which goes into effect March 19, 2018 allowing consumer class actions against credit card companies and other financial institutions. The rule requires sending a notice or to amend an arbitration agreement if entered into on or after March 19th and offers variable examples of language to use for agreements that apply to multiple products or services, if not all are covered by the rule. The lawsuit, filed in the Texas, calls the structure of the CFPB, a watchdog agency established in response to the 2008 financial crisis, unconstitutional. Filed on behalf of the U.S. Chamber of Commerce, American Bankers Association and other groups, the suit argues the rule to be imposed on U.S. businesses will not help consumers and the change would actually hurt consumers. According to the lawsuit, "Arbitration gives consumers the ability to bring claims that they could not realistically assert in court, including the small and individualized claims that they care the most about. In contrast, class-action litigation is significantly less effective than arbitration in addressing consumer claims." The CFPB has defended the rule as a necessary protection for consumers. Reportedly, the CFPB is also being criticized by another regulator, the Office of Comptroller of the Currency (OCC). The CFPB arbitration rule could cause the interest rates on credit cards to rise significantly — as much as 25%, according to the OCC, which oversees the banking sector. See full story here-- http://lat.ms/2yglm5G and http://bit.ly/2x2OIV3