Wieckowski resolution in support of proposed CFPB arbitration rule moves closer to approval in Assembly

SJR 25 calls for prohibiting companies from using forced arbitration clauses to eliminate consumers' rights to file class actions

August 23, 2016

SACRAMENTO – The California Assembly Judiciary Committee today approved a resolution by Senator Bob Wieckowski (D-Fremont) urging the federal Consumer Financial Protection Bureau (CFPB) to issue a final rule protecting consumers’ rights to participate in class action suits in order to pursue justice and deter unethical business practices.  Senate Joint Resolution 25 now heads to the Assembly floor for a final vote.  The Senate approved it earlier this month.

In May, the CFPB issued a proposed rule prohibiting the financial industry from writing contracts with mandatory arbitration clauses that eliminate the customers’ right to seek justice through class action suits. The proposed rule involves financial products and services, including credit cards, checking and deposit accounts, auto loans, consumer mortgages, prepaid cards, consumer debt acquisition, credit reporting and debt collection services.  The comment period on the proposed rule ended yesterday and the CFPB received just under 13,000 comments.   

“Allowing companies to use forced arbitration clauses which ban class actions, tramples on the rights of consumers who have been harmed by illegal practices and makes a mockery of our judicial system,” said Wieckowski, a member of the Senate’s Judiciary Committee.  “Permitting consumers to join a class action provides the strength in numbers needed to ensure corporate accountability and to deter further abuses.”

The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, after the financial industry’s subprime lending crisis plunged the United States into the Great Recession. In five years, it has given more than 25 million consumers a total of roughly $12 billion in relief through its enforcement actions against companies that violated the law. The Act authorized the CFPB to study mandatory arbitration clauses in consumer contracts and to issue regulations restricting or prohibiting their use if it found such regulations would protect consumers and be in the public interest.

The CFPB released a study on mandatory arbitration clauses in March that showed few consumers ever bring individual actions against financial service providers.  By contrast, class actions result in hundreds of millions of dollars in relief to millions of consumers each year, according to the study.

SJR 25 is supported by a number of consumer organizations, including Consumer Federation of California, Consumers for Auto Reliability & Safety, Consumers Union, Consumer Action, CALPIRG, Privacy Rights Clearinghouse and the Center for Public Interest Law, among several others.

Wieckowski is also the author of two arbitration-related bills, SB 1241 and SB 1007, to make the process fairer for consumers and workers.  SB 1241 would prevent choice of venue arbitration clauses that require California employees and consumers to travel out of state.  It would also make clear that California law, and not the laws of other states, govern the arbitration.  SB 1007 affirms a person’s right to a certified court reporter in private arbitration.  

Senator Wieckowski represents the 10th Senate District, which includes southern Alameda County and northeast Santa Clara County.