Take it to the Bank: Kelly Favors Donors Over Constituents in Arbitration Issue
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In March 2015, the CFPB released a study indicating that arbitration agreements restrict consumers’ relief for disputes with financial service providers by limiting class actions.
In reaching its findings, the CFPB studied nearly 850 consumer-finance agreements, reviewed more than 1,800 consumer finance arbitration disputes and more than 3,400 individual federal court lawsuits, looked at 42,000 credit card cases filed in selected small claims courts, analyzed roughly 420 consumer financial class-actions settlements in federal court, and conducted a national survey of 1,000 credit card holders.
The study said that in cases where credit card issuers with an arbitration clause were sued in a class action, companies invoked the arbitration clause to block class actions 65 percent of the time.
The research also showed a general lack of knowledge on the part of the public. Three out of four consumers who said they know what arbitration is did not know if they were subject to arbitration clauses. Of those who thought they did know, more than half were incorrect about whether their agreement actually contained an arbitration clause.
Also, fewer than 7 percent of those covered by arbitration clauses realized that the clauses restricted their ability to sue in court.
Republicans argue that arbitration is a faster, cheaper way to settle disputes. Of course, banks would want a faster, cheaper way to pay off their abuses. Arbitration allows them to reach less-public settlements, with lower legal fees and without the leverage that a large group of plaintiffs and the threat of a public trial would bring to the table.
Republicans warn the rule could lead to frivolous lawsuits against banks that serve to benefit the plaintiffs’ attorneys. The obvious counter would be that the courts are for people to pursue their rights and seek relief for damages they’ve incurred. Should this constitutionally protected right be shut off to our citizens specifically to protect banks, as opposed to letting the legal system work the way it’s supposed to by sorting out the frivolous from the legitimate?
For that matter, Kelly is part of two lawsuits that might be considered frivolous. One action is attempting to overturn Pennsylvania Governor Tom Wolf’s shutdown orders over the coronavirus. The other is seeking limits on mail-in voting in the state.
Some Republicans hate the CFPB, with some falsely deriding it as an unaccountable agency. Maybe they don’t like it because misdeeds of some of their big donors have been addressed through the agency’s supervisory and enforcement work.
A column on the National Consumers League Website in 2017 reported the CFPB has returned almost $12 billion to nearly 29 million wronged customers. Consumers at Bank of America, Citibank, and JPMorgan Chase received $1.7 billion in refunds after they were charged for needless and unwanted services. The CFPB also investigated and provided $100 million in financial relief to consumers when Wells Fargo defrauded its customers.
Looks like those donations to politicians like Kelly are a good investment for the banks.
Writing in the Washington Post, columnist Michelle Singletary said class-action suits shine a light on corporate misbehavior and can bring about changes.
“Settlements in class-action lawsuits generally include orders for companies to change their conduct,” Singletary said. “Class-action settlements or even the potential for a legal challenge can bring about better business practices.”
“Key to the new rule is also the transparency it will require,” Singletary offered. “More information will be made public about individual arbitration cases and the outcomes.”
In a column on the Moyers on Democracy Website, Gail Ablow wrote that arbitration “puts you up against a team of corporate lawyers, alone,” adding, “the results of arbitration cases are usually sealed. So the rest of us will not be warned to steer clear.”
“It doesn’t matter if you learn that there is a pattern of shady practices hurting millions of other customers, you cannot band together to have your day in court,” Ablow said.
Ablow quoted a column by David Lazarus of the Los Angeles Times in which he wrote, “What’s particularly repulsive here is the shamelessness with which conservatives framed the debate – pretending they were saving consumers from rapacious trial lawyers rather than doing the bidding of deep-pocketed corporate backers.”
Speaking of deep-pocketed corporate backers, it bears repeating that Mike Kelly has received $239,000 in contributions from commercial banks during his political career.
Trump Kills CFPB Arbitration Rule: The Little Guy Loses Again; Trump just threw future victims of financial crimes and predatory practices to the wolves of Wall Street. Moyers on Democracy Website. Nov. 2, 2017.