Fine print has never been the friend of consumers, and in recent years the perils have escalated as financial institutions have drawn up clauses that deny customers effective redress in disputes.
To counteract that, the Consumer Finance Protection Bureau drew up a rule to prevent banks and other financial companies from forcing customers with disputes to go to arbitration, a one-sided process that often costs more than the amount in dispute. But the U.S. House has voted along party lines to repeal the rule, and it is unclear whether Senate Republicans will follow suit.
They shouldn’t. Too many people have been victims of financial schemes. They need more protection, not less.
To see the value of the CFPB’s rule, one need look only at the recent Wells Fargo scandal in which salespeople opened up to 2 million accounts without their customer’s knowledge. When the angered customers read the fine print, they learned they could not band together in a class-action lawsuit, but would be required to go to arbitration, one by one, where their chances of recovering damages greater than the cost of arbitration were remote.
The independent CFPB rankles some members of Congress, who are trying to weaken it. The arbitration rule shows why we need a strong CFPB. No other federal regulators took the consumers’ side on this issue.
Businesses naturally wish to avoid frivolous lawsuits, and in some cases, arbitration is a sensible option to costly and time-consuming litigation.
But the fine print in these cases hurts consumers, who may not even realize what they have agreed to. The Consumer Finance Protection Board took a necessary step to protect average Americans.
Congress should side with consumers, not with what it says in the fine print, and abandon its efforts to repeal the rule.
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