[Congressional Record Volume 163, Number 128 (Friday, July 28, 2017)]
[Extensions of Remarks]
[Pages E1077-E1079]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]





PROVIDING FOR CONGRESSIONAL DISAPPROVAL OF THE RULE SUBMITTED BY BUREAU 
  OF CONSUMER FINANCIAL PROTECTION RELATING TO ARBITRATION AGREEMENTS

                                 ______
                                 

                               speech of

                           HON. KEITH ELLISON

                              of minnesota

                    in the house of representatives

                         Tuesday, July 25, 2017

  Mr. ELLISON. Mr. Speaker, for far too long, people's legal rights 
have been limited by the use of forced arbitration clauses in contracts 
for consumer financial products and services. Forced arbitration 
clauses, also called mandatory pre-dispute clauses, prevent cheated or 
defrauded American consumers from going to court to challenge 
wrongdoing by big banks, cell phone providers, auto leasing and auto 
financing firms, credit repair, payday lenders, debt collectors and 
credit card companies. Most arbitration clauses for financial products 
also prohibit consumers from participating in class actions. Forced 
arbitration clauses have been opposed by conservatives and 
progressives.
  Forced arbitration is a secret process where consumers seek redress 
at private firms chosen by the financial institution. This rigged 
system is why banks and lenders receive more than a million dollars per 
year paid out to them by their customers in forced arbitration, 
compared to just $86,216 returned to consumers. While advocates for the 
financial sector are correct that (sixteen) consumers recover an 
average of $5,400 in arbitration every year, they leave out the fact 
that banks and lenders receive an average award of $13,195 when they 
win--and they win 93 percent of the time. Indeed, a recent report found 
that consumers paid more restitution to Wells Fargo in arbitration than 
the other way around between 2009 and 2016, the prime years of its fake 
account scandal.
  After years of effort, the Consumer Financial Protection Bureau 
finalized a rule restoring American consumers' right to join together 
in court when harmed by systemic and widespread misconduct in the 
financial marketplace. The rule does not eliminate forced arbitration, 
but it would make individual secret arbitration more transparent by 
publishing arbitration complaints and outcomes. It also permits class 
action lawsuits.
  Instead of celebrating a rule that prevents financial interests from 
evading responsibility, Republicans seek to stop this rule under the 
Congressional Review Act (CRA). Today, they presented H.J. Res. 111.
  It is a vote to prevent consumers from receiving adequate 
compensation for fraud, deceptive and predatory practices.
  A vote for H.J. Res. 111 is a vote to deny Americans their 
constitutional right to access the legal process.
  H.J. Res. 111 would protect companies like Wells Fargo that used 
arbitration clauses and class action bans to create fraudulent 
accounts, overcharge customers with debit fees and mortgages and avoid 
responsibility for misconduct. H.J. Res 111 would remove federal 
protections for members of the military from evictions and-
repossessions while they are on active duty. And, H.J. Res. 111 would 
deny consumers the ability to get fair compensation for harm.
  For those reasons, and more, we urge you reject a resolution that 
shields companies from responsibility for risky and illegal conduct.
  Today is another example to show the American people just how much 
Republicans want to rig the system for the powerful. A vote FOR this 
resolution is a vote to rig the rules to take money from the pockets of 
the American people and put it into the pockets of the financial 
sector.
  H.J. Res. 111 puts the profits of banks, student loan, car loan and 
mobile wireless providers, credit card companies, payday lenders, debt 
collectors over the fair treatment of the American people.
  How?
  For far too long, people's legal rights have been limited by the use 
of forced arbitration clauses in contracts for consumer financial 
products and services. Forced arbitration clauses, also called 
mandatory pre-dispute arbitration clauses, prevent cheated or defrauded 
American consumers from going to court to challenge wrongdoing.
  If your bank opens a fake account in your name, if your student loan 
lender refuses to adjust your loan due to your loss of income, if your 
bank re-orders your debit transactions to maximize overdraft fees, it 
was frequently impossible for you to join with others to sue the bank 
as part of a class action.
  But two weeks ago, the Consumer Financial Protection Bureau responded 
to demands from consumers and changed the rules to protect consumers. 
The Consumer Bureau told banks and lenders they cannot keep their 
customers out of court. Class action lawsuits must be allowed. And, the 
Consumer Bureau ended the secrecy that surrounds the arbitration 
courts. Companies must report court filings, arbitration filings and 
rulings.
  The vast majority of the American people, consumer groups like the 
Consumer Federation of America, the Military Coalition, and even 
conservative groups oppose forced arbitration.
  A vote AGAINST H.J. Res. 111 is a vote to allow people to receive 
adequate compensation for fraud, deceptive and predatory practices.
  A vote AGAINST H.J. Res. 111 is a vote to give Americans their 
constitutional right to access the legal process.
  Please join me in voting against H.J. Res. 111.
  I include in the Record various statement of opposition to the joint 
resolution.

             [From National Consumer Law Center, July 2017]

               Summary of CFPB Rule on Forced Arbitration

       The Consumer Financial Protection Bureau (CFPB) has issued 
     a rule addressing the use of forced arbitration clauses in 
     the fine print of financial contracts. The rule has two 
     components:
       1) Restores consumers' day in court and accountability when 
     companies engage in widespread violations of the law. 
     Contracts that have forced arbitration clauses will not be 
     permitted to ban consumers from banding together by joining 
     or bringing class actions involving consumer financial 
     services.
       2) Brings transparency to the secretive arbitration 
     process. Companies that use forced arbitration in individual 
     cases must report court filings, arbitration claims and 
     rulings and other information to the CFPB (with identifying 
     information redacted) so that the CFPB can study the impact 
     of forced arbitration in individual cases.
       The rule applies to the core consumer financial markets 
     involving lending money, storing money, and moving or 
     exchanging money. With some exceptions, the rule would cover 
     most:
       Loans and credit, including credit cards, payday loans, 
     student loans, and auto loans (auto finance companies, not 
     auto dealers, except some buy-here/pay-here dealers). 
     Mortgages are already prohibited from having forced 
     arbitration clauses. Providing leads, referrals, purchasing, 
     selling and servicing credit are covered.
       Bank accounts, prepaid cards, money transfer services and 
     apps and remittances.
       Credit reporting, credit scores, credit monitoring.
       Credit repair, debt management, debt settlement, and debt 
     relief services, including those that purport to avoid 
     foreclosure. This includes debt relief involving. medical 
     debt, taxes, and other kinds of debt even if not credit 
     related.
       Check cashing, check collection, check guaranty services.
       Auto leases, but not auto dealers who assign their leases.
       Debt collection and payment processing related to these 
     products or services.
       Mobile wireless providers that allow third party charges 
     through the wireless bill.
       Key areas that are not covered include:
       Auto dealers (other than somebuy-here/pay-here dealers), 
     such as claims related to discrimination, add-ons, lemon 
     laws, odometer fraud, or deception about a car's history.
       For:profit colleges and trade schools, unless the school 
     directly makes loans.
       Credit cards, bank accounts and other products begun before 
     the rule goes into effect.
       Services offered directly by governments or tribes to 
     members within their jurisdiction. The rule does apply to 
     tribal payday lenders who offer products off-reservation.
       Investment products and services by entities regulated by 
     the SEC.
       Individuals and others who offer a product or service to 25 
     or fewer consumers a year.
       Nonfinancial products and services, like nursing homes, 
     cable/mobile providers (except for third party charges on 
     bills), employers, or store payment plans that don't charge.
       The rule applies to new contracts entered into 211 days 
     after a final rule is published (likely Spring of 2018) and 
     older contracts that are purchased or acquired after that 
     date.

[[Page E1078]]

                                                    July 25, 2017.
     Re OPPOSE H.J. Res. 111, Congressional Review Act resolution 
         to repeal CFPB arbitration rule and block future reform 
         of forced arbitration.

     House of Representatives,
     Washington, DC.
       Dear Representative: Americans for Financial Reform and 
     Public Citizen write to urge your opposition to H.J. Res. 
     111, the resolution to repeal the Consumer Financial 
     Protection Bureau (CFPB)'s arbitration rule under the 
     Congressional Review Act (CRA) and block a similar future 
     rule to protect consumers. This extreme legislative measure 
     would harm the public by insulating bad actors from 
     accountability when they systematically defraud consumers, 
     and give lawbreakers a competitive edge in the marketplace as 
     a result.
       Based on five years of careful study and consideration 
     mandated by the Dodd-Frank Wall Street Reform and Consumer 
     Protection Act of 2010, this rule is the result of a 
     Congressional directive instructing the agency to restrict or 
     ban forced arbitration if it found the practice harmful to 
     consumers. The rule centers on two commonsense measures: 1) 
     it restores the right of consumers to join together in court 
     by prohibiting class action bans, ensuring consumers can hold 
     banks accountable for widespread harm, and 2) it brings 
     transparency to individual arbitration by publishing claims 
     and outcomes with sensitive information redacted, ensuring 
     banks can no longer cover up illegal behavior.
       According to a 2016 poll conducted by Pew Charitable 
     Trusts, nearly 90% of consumers want their right to join 
     together in class action lawsuits restored. Indeed, more than 
     100,000 individual consumers across the country wrote in to 
     support the rule during its public comment period, as did the 
     Military Coalition, representing 5.5 million servicemembers. 
     Two weeks ago, 310 consumer, civil rights, faith, and labor 
     organizations wrote to support the final rule.
       All available data supports the conclusion that class 
     action lawsuits hold bad actors accountable and enable harmed 
     consumers to be made whole. Without the option to join 
     together, just 25 consumers with claims of less than $1,000 
     pursue arbitration each year. In contrast, class actions 
     returned $2.2 billion to 34 million Americans between 2008 
     and 2012, after deducting attorneys' fees and court costs. An 
     independent study conducted by a former clerk for Justice 
     Scalia reached similar conclusions, finding ``even the 
     harshest critics of consumer class actions would have to 
     concede that the picture it paints is a fairly successful 
     one.''
       While bank lobbyists suggest that consumers recover more 
     money in arbitration than class actions, these claims are 
     misleading at best and brazenly dishonest at worst. Even with 
     class action bans currently a widespread presence in customer 
     contracts, available data shows consumers still recover $440 
     million more in class actions than arbitration every year, 
     with nearly 7 million consumers receiving cash relief 
     annually. Class actions also often result in injunctive 
     relief and systemic reforms that benefit consumers who are 
     not members of the class.
       Big banks and lenders prefer forced arbitration precisely 
     because the vast majority of consumers cannot and do not 
     pursue claims in that forum. Though bank lobbyists loudly 
     proclaim that consumers recover an average of $5,400 in 
     arbitration, they neglect to mention that this number is 
     based on just sixteen consumers per year who receive any 
     relief in arbitration, across all fifty states. Because 
     arbitration is so time and resource-intensive for consumers 
     compared to class action lawsuits, the consumers that choose 
     to pursue arbitration tend to have high-dollar claims backed 
     by strong evidence--and even these sixteen consumers recover 
     an average of just nine cents for every dollar claimed.
       It is no wonder that the financial industry prefers 
     arbitration when consumers receive a total of just $86,216 
     per year. If Wells Fargo had to pay $5,400 each to even a 
     small percentage of the thousands of customers defrauded in 
     its fraudulent account scandal, surely it would switch sides 
     in this debate. But forced arbitration not only allows banks 
     and lenders to keep millions in illegal profits, it 
     affirmatively lines their pockets with large awards paid out 
     by consumers.
       The same study that found sixteen consumers recover a total 
     of $86,216 in arbitration per year also found that banks and 
     lenders receive more than a million dollars per year paid out 
     to them by their customers in forced arbitration. While 
     sixteen consumers recover an average of $5,400 in arbitration 
     every year, banks and lenders receive an average award of 
     $13,195 when they win--and they win 93% of the time. Indeed, 
     a recent report found that consumers paid more restitution to 
     Wells Fargo in arbitration than the other way around between 
     2009 and 2016, the prime years of its fake account scandal.
       In addition to the high payouts banks and lenders receive 
     in arbitration, the Wells Fargo scandal demonstrates how 
     financial companies use secret arbitration proceedings to 
     keep misconduct out of the public eye. After the CFPB led a 
     $185 million enforcement action against the bank for opening 
     as many as 3.5 million fraudulent accounts and credit cards, 
     reports revealed that customers had been trying to sue Wells 
     Fargo over fake accounts since at least 2013. Yet the bank's 
     lawyers used arbitration clauses buried in the fine print of 
     the customers' other legitimate account contracts to force 
     allegations of fraud out of public court--and the bank 
     continued to profit from its illegal scheme for years.
       Finally, real-life experience shows that restoring consumer 
     class action rights will not increase costs or decrease 
     availability of credit. Consumers saw no increase in price 
     after Bank of America, JPMorgan Chase, Capital One, and HSBC 
     dropped their forced arbitration clauses as a result of 
     court-approved settlements. Similarly, mortgage rates did not 
     increase after Congress banned forced arbitration in the 
     mortgage market.
       The CFPB arbitration rule will ensure that bad actors 
     cannot turn fraud into a viable profit model to the detriment 
     of law abiding institutions, including the many community 
     banks and credit unions that largely do not include 
     arbitration clauses in their customer contracts. This new 
     rule simply allows consumers to enforce rights deemed crucial 
     by state and federal protections and increases accountability 
     and transparency, making the financial system stronger and 
     safer for all of us. We urge you to reject H.J. Res. 111 and 
     allow this data-driven, commonsense rule to take effect.
           Sincerely,

                                Americans for Financial Reform

     & Public Citizen.
                                  ____


            [From U.S. News and World Report, July 21, 2017]

                       The GOP's Foolish Decision

                            (By Dean Clancy)

       Those who support overturning the arbitration rule are on 
     the same side as corporate wrongdoers and sexual harassers.
       Minimizing ``lawsuit abuse'' has long been a GOP priority. 
     But overturning the anti-forced arbitration regulation issued 
     this week by Consumer Financial Protection Bureau, as 
     congressional Republican leaders are reportedly rushing to 
     do, would be a political and policy mistake.
       Forced arbitration clauses waive a customer's right to sue 
     a company in case of a dispute. The fine-print provisions can 
     be found nowadays in seemingly every contract we agree to, 
     and every app we download.
       Business lobbyists defend the clauses as voluntary 
     agreements that minimize ``lawsuit abuse'' by ``greedy'' 
     class-action trial attorneys. But in reality, the clauses are 
     often imposed on consumers without informed consent, and are 
     increasingly being used to shield corporate wrongdoing.
       The new rule protects Americans from the negative effects 
     of forced arbitration clauses in a host of financial 
     contracts, such as credit cards, bank accounts and payday 
     loans. The clauses are already banned in mortgages and real 
     estate.
       News reports suggest the House may vote as soon as next 
     week on a formal ``resolution of disapproval'' of the CFPB 
     regulation, which was authorized by Congress in 2010, 
     formally proposed in 2016 and finalized this week.
       A resolution of disapproval enables Congress to kill a 
     federal regulation within 60 legislative session days 
     following its formal publication, by means of a quick up-or-
     down, simple-majority vote, with no chance of amendment or 
     filibuster. If the regulation is disapproved by the House, 
     the Senate and the president, it is dead and may not be 
     reissued. This procedure has been used successfully to 
     overturn fourteen regulations to date, all but one of them in 
     the past six months.
       Last week when CFPB announced the new rule, prominent 
     Beltway Republicans cried foul: Rep. Jeb Hensarling of Texas, 
     chairman of the powerful House banking committee, denounced 
     the reg as a ``big, wet kiss'' to the trial lawyers. Sen. Tom 
     Cotton of Arkansas vowed to kill the regulation swiftly.
       The U.S. Chamber of Commerce urged Congress to kill not 
     only this regulation, but every CFPB rule, on grounds the 
     agency is unconstitutional and and therefore all of its 
     actions are invalid.
       The GOP would be terribly foolish to go down this road, for 
     three reasons. Forced arbitration is: (1) unconscionable; (2) 
     unconstitutional and (3) a big political loser.
       1. Unconscionable. Here are some examples of the kind of 
     behavior CFPB's reg is trying to prevent.
       Wells Fargo Bank admitted its employees systematically 
     created millions of sham bank accounts in its customers' 
     names, and then in many cases fraudulently billed those same 
     customers for fees and services they never agreed to. 
     Executives of the megabank knew this was happening but did 
     nothing. Then, they decided to blame 5,300 ``rogue employees, 
     who were summarily fired. Now, to ward off thousands of 
     lawsuits, the company is hiding behind binding arbitration 
     clauses in its victims' contracts.
       Roger Ailes, the now-deceased executive of Fox News, was 
     accused, before his death, by multiple female employees of 
     sexual harassment. To keep the women's allegations out of 
     court, and to forestall a long line of past accusers from 
     taking the witness stand, he invoked clauses in his 
     employees' hiring contracts requiring any disputes be handled 
     through a private, highly secretive arbitration process.
       Military readiness has been negatively affected by 
     unscrupulous payday lenders who prey on military 
     servicemembers and veterans. The victims become overly 
     indebted thanks to exorbitant interest rates and hidden fees 
     they don't understand, and then find themselves unable to 
     obtain relief thanks to forced-arbitration clauses. Because 
     of this,

[[Page E1079]]

     the Military Coalition, which represents nearly 6 million 
     uniformed service members, veterans and their families, has 
     formally petitioned Congress to ban the clauses.
       2. Unconstitutional. Question: If binding arbitration 
     clauses are so bad, why are they so common? Because a series 
     of Supreme Court rulings (the most recent one in May) have 
     effectively overturned the traditional common-law 
     understanding of arbitration. In past centuries, arbitration 
     was understood as a voluntary option that is fair only when 
     both parties are of roughly equal bargaining power or else 
     have agreed to it freely after a dispute has arisen.
       In lieu of that reasonable understanding, the Court has 
     substituted a doctrinaire ``right of contract'' that allows a 
     powerful party to effectively force a weaker party to waive 
     his or her constitutional right to sue, before a dispute has 
     arisen and often without informed consent. This 
     transformation defies common sense and severely weakens 
     Americans' Seventh Amendment right to a jury trial.
       Today, arbitration has devolved into a private star-chamber 
     that's stacked in favor of the accused corporation--which, 
     unsurprisingly, usually wins.
       Is the CFPB itself unconstitutional? Yes, in my opinion. 
     But so is forced arbitration. And Congress has a duty to 
     protect our right to a jury trial.
       Instead of lashing out at the agency by overturning this 
     regulation, Congress should do the right thing and amend the 
     Federal Arbitration Act to make binding arbitration 
     agreements truly voluntary for all Americans, as the 
     Constitution requires. Having done so, it could then, at its 
     leisure, reform (or, as I would prefer, abolish) the 
     controversial agency.
       3. A Political Loser. Those who vote to overturn the CFPB 
     regulation will be placing themselves on the side of accused 
     sexual harassers, corporate wrongdoers and unscrupulous 
     payday lenders who exploit our troops.
       If Republicans are politically sensible--or just have an 
     ounce of self-respect--they'll take the high road and let 
     this reasonable rule stand.

                          ____________________