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Protecting consumers from financial services abuses

Protection for consumers is a stark example of the divide between Democrats and Republicans in this election year.

By ROBERT MARTIN

Since its inception in 2010, the Consumer Financial Protection Bureau has been leveling the playing field between consumers and the powerful financial services industry.

Most recently, the CFPB is moving to restrict the use of arbitration clauses in consumer contracts.

What is an arbitration clause? It is in the fine print of almost any agreement that we enter into these days for credit cards, car loans, insurance, cable TV, nursing homes - you name it.

These clauses take away the right to go to court when harmed and impose an unfair private arbitration process where the deck is stacked against you.

That's not all.

Arbitration clauses usually also prohibit consumers from banding together in group "class action" lawsuits. Class actions are the only way to hold big companies accountable because the dollar amounts at stake are too small for consumers to sue on their own.

The upshot of all this is that companies who cheat consumers get a free pass because for all practical purposes they can't be sued.

The CFPB is now moving to change this sorry picture.

It has proposed a rule banning arbitration clauses where a consumer waives that right to be part of a class action lawsuit. This is a head-on challenge to big businesses, because what they fear most are class-action suits that will cost them money - and also force them to alter their unfair practices.

The labor movement played an important role in the creation of the CFPB by the Democratic-controlled Congress during President Obama's first term.

Since then, the Republicans, who now control the U.S. Senate and the U.S. House of Representatives, have used every opportunity to try to torpedo the agency.

Nonetheless the CFPB and its director, Richard Cordray, have forged ahead in policing financial products, including mortgages, credit cards, student loans, and credit reporting. DC 37 and its national union, the American Federation of State, County and Municipal Employees, have been weighing in as the CFPB addresses these issues.

The CFPB makes a big difference in the financial lives of working people, low-income communities, and senior citizens.

The CFPB will be proposing a rule on payday loans in June. These loans are awful. They trap borrowers in a never-ending cycle of interest payments and fees tied to their paychecks - or for senior citizens, their Social Security checks. We hope for the strongest possible rule from the CFPB.

Fortunately, New York is one of the 15 states where payday loans are illegal. However, every year there are attempts to change state law to allow payday loans or similar products.

This year, legislation has again been introduced to allow check cashers to get into the lending business. DC 37 opposes this legislation and has been working hard, along with a broad coalition of community groups and other organizations, to prevent New Yorkers from being hit with high-cost loan products.

Protection for consumers is a stark example of the divide between Democrats and Republicans in this election year.

Add the continuation of a strong and vibrant CFPB to your list of reasons to vote Democratic and for the presumptive nominee, Hillary Clinton, in November.

Robert Martin is the associate director at DC 37's Municipal Employees Legal Services.