Senate Repeals Rule Allowing Class-Action Suits Against Financial Firms
STEVE INSKEEP, HOST:
And by a single vote, the Senate this week made it harder for consumers to file lawsuits against banks.
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VICE PRESIDENT MIKE PENCE: On this vote, the yeas are 50, the nays are 50. The Senate being equally divided, the vice president votes in the affirmative, and the joint resolution is passed.
INSKEEP: Vice President Mike Pence cast the tie-breaking vote, overturning a rule by the Consumer Financial Protection Bureau. Richard Cordray is director of the CFPB, appointed by President Obama - still in office - and no fan of the Senate vote. He's on the line. Good morning, sir.
RICHARD CORDRAY: Good morning, Steve.
INSKEEP: I guess we should explain. Banks like to get people to sign agreements - you know, those pages and pages of conditions - sign agreements that send any disputes to arbitration. Your rule made that harder and let people sue instead. Why was that so important?
CORDRAY: Well, this is something that happens in the fine print of many consumer finance contracts. People across this country who are harmed as a group should have the ability to bring and assert their legal rights as a group. And this vote, which takes that right away from them, is an enormous setback for consumers all over this country.
INSKEEP: Although they would still have, even after the Senate vote, assuming President Trump signs the change into law, they'll still have some kind of recourse. There will be some kind of recourse in the agreement to complain when there is some kind of dispute, right?
CORDRAY: Well, there will and there won't be. If consumers are going to pursue their rights as a group, and often in consumer finance, you'll have problems that occur where wrong is done to many, many consumers, maybe millions of consumers, like the Wells Fargo fake account scam...
CORDRAY: ...Or the Equifax data breach, and they're all harmed to a small amount but to a broad degree, they really won't be able to pursue those claims because to have to pursue a small-dollar claim on your own isn't effective. And as shown by the fact that when banks and large financial companies are harmed themselves in these amounts, they too will pursue class actions. So they'll be able to do that, but their customers won't. That's not fair. It's not good for consumers, and it's a very disappointing result by the Congress.
INSKEEP: Oh, you're saying that if Wells Fargo, or name your bank, took 50 bucks from me or 500 bucks from me, I need to band together with other people in order to have the resources to challenge them in a class-action lawsuit, that's what you're talking about when you say for a group...
CORDRAY: That's right. And you'll see banks and credit unions themselves bringing class actions where they're wronged. The Equifax breach is - been the basis for a lawsuit by banks and financial companies against Equifax.
INSKEEP: But how do you answer the - but how do you answer the Republican description of these class-action lawsuits, which is essentially that trial lawyers want to make a profit and so they recruit clients, so to speak, and they file these class-action suits and the allegation is that it's essentially about legal fees?
CORDRAY: Well, look, in order to pursue people's rights, they need to have lawyers help them. Consumers should have the same right to have lawyers help them that the banks and other large financial companies do. They have their lawyers. Why shouldn't consumers have their lawyers? And the bottom line is not the lawyers. It's about people being able to pursue their legal rights and get justice when they're wronged. And consumers and families across the country should have the right to do that. But these arbitration clauses - forced arbitration causes - take that right away from people and force them to pursue claims on their own, which, as the companies know, means that those complaints will not be pursued at all. And the money will rain in the pockets of the companies, and they can - they can do their wrong without - with impunity and not be pursued by consumers.
CORDRAY: So Wells Fargo and Equifax, companies like that, will be free to break the law without fear of having their consumers pursue their rights in court. It's not the American way.
INSKEEP: So in a sentence or two, would you say the financial system is less safe for consumers than it was?
CORDRAY: It's not only less safe for consumers, it's less fair for consumers. They should have the right to pursue their rights in court. It's the American way. It's been true for hundreds of years. And these clauses, buried deep in the fine print of contracts, take those rights away from people, and often, they don't even know it.
INSKEEP: Richard Cordray, pleasure talking with you. Thank you very much.
CORDRAY: Thanks, Steve.
INSKEEP: He is director of the Consumer Financial Protection Bureau. Transcript provided by NPR, Copyright NPR.