Compliance » House Votes To Block Rule Limiting Mandatory Arbitration

House Votes To Block Rule Limiting Mandatory Arbitration

July 27, 2017

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The Republican-led House of Representatives has voted to block a rule that would have seriously curtailed the use of mandatory arbitration clauses in consumer contracts with banking and financial services companies. The rule, released earlier this month by the Consumer Financial Protection Bureau, would allow the institutions to continue forcing consumers to arbitrate individual complaints, but it would not prevent them from trying to initiate or join class action lawsuits. This Los Angeles Times article notes that Wells Fargo’s arbitration clause allowed  it to keep at bay consumer lawsuits over its unauthorized creation of consumer accounts, although it did agree to settle a number of class action lawsuits after the scandal broke. Proponents of the new rule, says the Times, argue that if lawsuits had been able to proceed earlier, the bank’s abusive consumer practices might have been revealed and stopped earlier. Critics of the rule say it will lead to expensive frivolous litigation and harm the banking system.

 

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