Our Senators must reject efforts to repeal the CFPB rule on forced arbitration and its many protections for servicemembers, veterans, and their families.
The Consumer Financial Protection Bureau’s (CFPB) new arbitration rule will promote accountability and transparency for a wide variety of consumer financial products and services offered to servicemembers and veterans. The rule allows people to band together in court and prevents companies from using fine print to take away American’s 7th Amendment right to access to the courts through forced arbitration clauses with class action bans.
Despite enjoying the strong support of The Military Coalition, representing 5.5 million servicemembers, The American Legion, 29 military groups, and leading veterans, the rule is under attack in Congress. The House already voted to overturn the rule under the Congressional Review Act’s fast-tracked procedures, and the fate of the rule now lies with the Senate.
It is disappointing to see members of Congress who routinely tout their support for our men and women in uniform consider overturning a rule to protect servicemembers’ financial well-being. The Military Lending Act (MLA), which garnered bipartisan support, already bans forced arbitration of certain disputes. But the Consumer Bureau’s rule provides essential protection for our military families and veterans (the MLA does not apply to veterans).
Moreover, the rule covers a broader range of financial products, like these that are outside the MLA:
· Auto loans and other purchase money loans;
· Credit monitoring and other credit reporting services;
· Bank accounts, prepaid cards, and other noncredit accounts
· Loans and accounts taken out before military service, such as a credit card that a servicemember still uses;
· Debt collectors and debt buyers pursuing debt not covered by the MLA; and
· Home equity lines of credit.
The MLA provides no protection in these situations that ARE covered by the CFPB rule:
· Credit bureau giant Equifax’s initial effort to block victims of its massive data breach from access to the courts through a forced arbitration clause hidden on the website for the free credit monitoring it is offering.
· Disputes about credit report problems, like TransUnion’s reckless mismatching of consumers, including active duty service-members serving abroad, to people with similar names on a government watch list of suspected terrorists and drug traffickers.
· Wells Fargo’s use of older bank account and credit card agreements to block lawsuits over the theft of consumers’ identity used to open fake accounts.
· Banks’ rampant violation of the Servicemembers Civil Relief Act through illegal repossession of cars while servicemembers are away on active duty, as happened to Sergeant Charles Beard and Sergeant Jin Nakamura.
· Army soldier Prentice Martin-Bowen, who sued a buy-here-pay-here used car dealer that repossessed his car despite on-time payments, and kept two trade-in cars and the down payment. Martin-Bowen was forced into arbitration and won a small amount, but he couldn’t pay his lawyer a penny in fees and he couldn’t bring a class action to help the 100 others who suffered the same result. The arbitrator admitted that a jury would likely have awarded more.
· Wells Fargo’s illegal padding of auto loan payments with duplicative car insurance, including for servicemembers on active duty. Some contracts had arbitration clauses.
· Army veteran Joshua Hause, who was given “no choice” and was forced to convert his existing payday loan to a 279% open-end “flex” loan that “I’ll never get out of.” A class action lawsuit over these practices was thrown out of court due to a forced arbitration clause.
In fact, four of the five top areas of servicemember complaints in the Consumer Bureau’s complaints database are not covered by the current protections of the MLA. Members of the military are telling the consumer watchdog that existing protections do not go far enough and the Consumer Bureau is listening. Its rule on forced arbitration is in direct response to the needs of servicemembers and American consumers at large.
Our men and women in uniform fight to protect our constitutional rights, including our day in court guaranteed by the 7th Amendment. More than a talking point or campaign rallying cry, our military servicemembers and veterans deserve to have their concerns heard and see commonsense rules put in place to protect their, and their families, financial wellbeing.
Congress must not strip away the rights of our military by repealing the Consumer Financial Protection Bureau’s arbitration rule.