In the past year we’ve featured a few stories about the Consumer Financial Protection Bureau and how it aims to keep consumers safe from predatory business practices. From collecting consumer complaints to limiting the power of payday lenders, the CFPB was formed to put regular people on somewhat equal footing with big companies. Still, not everyone sees the relatively new government agency this way. Opponents claim the CFPB has too much power to regulate businesses, thus harming both companies and the consumers who patronize them.
This way of thinking recently won out in a Senate vote that stripped the CFPB of a key regulatory power. In an extremely close contest, legislators voted to remove a rule that would allow people to form class action lawsuits against banks. Instead, consumers must now rely on their bank’s arbitration process to settle any complaints. Proponents of the change say this makes matters easier for people since going through arbitration is far faster than heading to court. Plus, they point to a CFPB study that found that consumers receive an average award of more than $5,000 from arbitration compared with just $32 for class action lawsuits.
But critics are quick to point out that the situation is more complicated than the other side makes it seem. They say class action awards are so small because people use them to settle minor issues like wrongly applied overdraft fees. After all, it’s not worth it for someone to sue a bank on their own to recover $25. Pro-CFPB advocates also say that arbitration cases occur with less frequency and often include large sums of money, which explains the big settlements awarded to successful claimants. Despite these objections, though, the new rules just need a presidential signature in order to become law. Analysts expect that opponents of the CFPB will then target the agency’s new payday lending rules as part of another regulatory rollback.
- Do you think Congress should have eliminated the CFPB regulation that allows consumers to file class action lawsuits against banks?
- Should legislators continue to remove regulations meant to protect consumers? Why or why not?