U.S. banks and credit card companies could be prevented from blocking customers from banding together to sue them under a rule released by the country’s consumer finance agency on Monday.
In releasing the rule, which goes into full effect in eight months, the Consumer Financial Protection Bureau fired the first shot in a likely brutal political battle between Republicans and Democrats over regulators’ reach into banks’ workings and customer rights.
Banks blasted the rule, which bars financial firms from forcing customers to agree to settle disputes only through arbitration as a condition of opening new accounts, but consumer advocates said it will make sure wronged customers have their day in court.
“Mandatory arbitration” clauses that block customers from filing or joining a class-action lawsuit appear in contracts for a wide variety of products
The rule was proposed last year under former President Barack Obama, a Democrat who appointed the current director of the CFPB, Richard Cordray. Republicans now control both Congress and the White House, and are already looking into stopping it in its tracks.
Just before the CFPB unveiled the final rule, Acting Comptroller of the Currency Keith Noreika wrote Cordray to raise “safety and soundness” concerns with a draft version he had read and asked the CFPB to share data it used in crafting the rule, according to a copy of the letter obtained by Reuters.