Senator Elizabeth Warren, who opposes efforts to dismantle a new rule allowing customers to sue financial companies in class actions, released letters on Tuesday from U.S. bank CEOs in which they declined to defend lobbying against the measure and several said they already comply with it.
Warren asked the bank CEOs if they believed the rule should be reversed.
“Despite the claims of their paid lobbyists, not a single one of the 16 CEOs I wrote was willing to defend efforts to gut the (Consumer Financial Protection Bureau’s) pro-consumer arbitration rule,” she said in a statement.
The letters to liberal Warren showed Capital One , Bank of America, Ally Financial, T.D. Bank and HSBC North America rarely use mandatory arbitration clauses, where customer must give up the right to sue and agree to take possible future disputes to closed-door mediation as a condition of opening accounts.
American Express, Citi, JPMorgan Chase & Co., PNC and SunTrust give new customers the opportunity to opt out of the clauses within a limited timeframe, the letters show.
The rule, finalized by the CFPB in July, does not end arbitration. Instead, it says customers cannot be forced to only use arbitration in settling disputes. The practice has spread like wildfire across industries following the Supreme Court 2011’s decision that the clauses are legal.
The banking industry says the rule, effective next year, will drive up costs with time-consuming class actions. It also says arbitration is more effective in delivering restitution to individuals. A CFPB study found customers receive higher awards through arbitration than lawsuits on average but noted fewer arbitration cases lead to awards.
Saying the rule only benefits trial attorneys, Republicans in the House of Representatives swiftly voted to kill it. The Senate, where Democrats and some conservatives say the rule restores customers’ constitutional rights to due process, has been slower to act. Under the Congressional Review Act, both chambers must approve a repeal resolution to kill the rule.
Democrats also say arbitrations are rigged against customers because they are handled out of the public eye and arbitrators are often paid by companies.
Mandatory arbitration clauses have grabbed the spotlight over the last year, after they blocked customers from suing Wells Fargo & Co. in the phony account scandal. Equifax Inc. included arbitration clauses when it offered credit monitoring to victims of its recent hack, but then removed them under public pressure.
(Reporting by Lisa Lambert; Editing by Cynthia Osterman)
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