WASHINGTON >> Equifax and Wells Fargo.
Democrats determined to stop Republicans from overturning a consumer-oriented rule are using the scandals roiling both companies to hammer the GOP’s efforts. A hack of Equifax’s computer system exposed the sensitive personal information of 143 million Americans. Wells Fargo was fined $100 million by federal regulators for its illegal sales practices in which employees trying to reach unrealistic sales goals opened accounts without customers’ permission.
In July, the Consumer Financial Protection Bureau decided to ban most types of mandatory arbitration clauses. The clauses require credit card or bank customers to use an arbitrator when they have a dispute rather than sue in court, and the clauses were commonly used by both companies.
The House has since voted to block the consumer bureau’s rule. Now the clock is ticking on action by Senate Republicans.
“These companies did terrible, terrible wrong and they want to prevent consumers from having rights to sue them. That is outrageous,” Senate Minority Leader Chuck Schumer, D-N.Y., said at a news conference today in the Capitol. “Put simply, we’re urging our Republican colleagues to say no to immunity for Equifax, Wells Fargo or anyone else who does such horrible financial misdeeds.”
Democrats argued that, without the new rule, companies will be able to keep private those disputes pursued through mandatory arbitration.
“They allow corporate America to take advantage of a shadow justice system,” Sen. Al Franken, D-Minn., said of the arbitration clauses.
Banks have strongly opposed banning arbitration clauses, arguing that arbitration is a more efficient way of handling small disputes and that class-action lawsuits largely benefit the lawyers handling the cases.
In voting to overturn the rule in late July, House Republicans said the average payout for consumers in financial class-action lawsuits was $32 and attorneys made nearly $1 million.
Senate Majority Leader Mitch McConnell, R-Ky., has not scheduled a vote on repealing the rule, but Democratic aides said he is trying to get fellow Republicans on board with repeal of the rule.
With Equifax’s former CEO expected to testify before congressional panels next week, a news conference today gave Democrats an opportunity to link the credit reporting agency with the use of arbitration clauses.
“Whether it is fake accounts at Wells Fargo or a massive data breach at Equifax, recent scandals have demonstrated that consumers need to access the justice system when a big, powerful company opens accounts in their name, without their consent, and leaves them vulnerable to fraud by failing to secure their personal data,” said Sen. Catherine Cortez Masto, D-Nev.
Equifax, after criticism from consumer advocacy groups, announced that it had removed arbitration clauses for those who enroll in its free credit monitoring and identity theft protection.