Press Release

Attorney General Josh Shapiro Joins With 19 AGs to Defend Arbitration Rule and Protect Consumers’ Legal Rights

July 28, 2017 | Topic: Rights

HARRISBURG —Attorney General Josh Shapiro and 19 other Attorneys General today sent a letter to U.S. Senate leaders defending the Consumer Financial Protection Bureau’s Arbitration Rule, which stops companies from forcing consumers to sign away legal rights.

The House recently passed a Joint Resolution of Disapproval that would set aside the CFPB’s Arbitration Rule under the Congressional Review Act. The Attorneys General are asking the Senate to oppose that resolution and support consumers’ rights to go to court to file claims against financial institutions.

“The Arbitration Rule protects consumers’ legal rights when they’ve been ripped off by a financial services company,” Attorney General Josh Shapiro said. “Access to the civil justice system is a fundamental right for every Pennsylvanian and American, and I’ll fight to protect those rights.”

The letter signed by Attorney General Shapiro and 19 of his colleagues was sent today to Senate Majority Leader Mitch McConnell and Minority Leader Charles Schumer.

“The CFPB’s Arbitration Rule would deliver essential relief to consumers, hold financial services companies accountable for their misconduct, and provide ordinary consumers with meaningful access to the civil justice system,” the letter states.

Restrictions on consumers’ participation in class action cases are routinely inserted by financial institutions into contracts for financial products such as credit cards, payday loans, and checking accounts. Many consumers enter contracts without being aware they are relinquishing significant

The Arbitration Rule bans contract clauses like these and restores the rights of consumers to participate in class action lawsuits, a critical step for holding financial services companies accountable for contract violations, infringement of property rights, fraud and abuse.

A good example is the Wells Fargo scandal involving bogus bank accounts. Last year, the CFPB fined Wells Fargo $100 million for setting up 2 million bank accounts without customers’ permission. Wells Fargo then tried to use its arbitration clause to block a class action by the consumers it had harmed. Only in the face of public backlash did Wells Fargo allow the class action to move forward – and a judge recently approved a settlement of $142 million. The Arbitration Rule will ensure consumers can hold financial institutions accountable for wrongdoing.

As the letter states, class action lawsuits are particularly critical when consumers have been defrauded out of small amounts of money, as most customers lack the resources to pursue arbitration for $20 or $30. By forcing consumers to bring small claims on their own, companies can avoid big refunds and continue harmful practices, reaping millions of dollars in illegal fees.

“In today’s economy, consumers get nickeled and dimed too often, and this rule protects their rights to not be ripped off,” Attorney General Shapiro said. “Twenty or thirty bucks can be a lot of money for consumers – and they should have the right to group their claims together and go to court to get their money back if they’ve been scammed by a big financial services company. The CFPB Arbitration Rule protects those rights, and Congress should not take them away.”

Protecting Pennsylvania consumers from financial scams is a priority of Attorney General Josh Shapiro. In recent weeks, Attorney General Shapiro filed a lawsuit with other Attorneys General against Education Secretary Betsy DeVos, after DeVos announced plans to roll back a critical student lending rule, and he also took action with colleague Attorneys General, urging the Federal Communications Commission to allow telephone companies to block illegal robocalls.

Last week, Attorney General Shapiro announced the creation of a Consumer Financial Protection Unit to better protect Pennsylvania consumers from financial scams, and appointed an experienced consumer protection attorney to lead the initiative.

In addition to Attorney General Shapiro, Attorneys General from the following states signed onto the joint letter to Senate leaders today: Massachusetts, California, Connecticut, Delaware, Hawaii, Iowa, Illinois, Maryland, Maine, Minnesota, New Mexico, New York, North Carolina, Rhode Island, Oregon, Washington, Vermont and Virginia, as well as the District of Columbia and Hawaii’s Office of Consumer Protection.

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