Wieckowski resolution urges federal action to allow consumer class action suits in financial cases

SJR 25 calls on Consumer Financial Protection Bureau to pass rules protecting the rights of consumers to unite against companies violating the law

August 3, 2016

SACRAMENTO – State Senator Bob Wieckowski (D-Fremont) today introduced Senate Joint Resolution 25 to urge the federal Consumer Financial Protection Bureau (CFPB) to issue final rules protecting the rights of consumers to file class actions related to 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.    

In May, the CFPB issued proposed rules prohibiting the financial industry from writing contracts with mandatory arbitration clauses that eliminate the customers’ right to seek justice for wrongdoing through class action suits.

“These bans are unconscionable because today consumer contracts are “take-it-or-leave-it” contracts where customers must choose between losing access to modern goods and services, or  losing their legal rights to go to court as a group seeking redress for getting ripped off,” said Wieckowski, a member of the State Senate’s Judiciary Committee.  “Allowing consumers who have been victimized to come together as a class deters financial abuses and provides stronger accountability over an industry that has shown it needs oversight.  Without the ability to band together, individual customers will be at a great disadvantage against powerful corporations.” 

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was approved by Congress after the financial industry’s subprime lending crisis plunged the United States into the Great Recession. In just five short 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 study, released in March, showed very 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.

“As the most populous state in the nation, it is important that California go on the record in support of the CFPB’s rules to protect the rights of consumers,” said Richard Holober, executive director of Consumer Federation of California.  “Senator Wieckowski’s resolution recognizes that class actions are necessary to hold corporations accountable for breaking the law and providing consumers an effective way to get relief.”

When it issued the proposed rules earlier this year, the CFPB said it was targeting “gotcha” clauses that allow companies to “sidestep the legal system, avoid accountability, and continue to pursue profitable practices that may violate the law and harm countless consumers.”

SJR 25 encourages the CFPB to adopt the proposed rules or an amended version “that even more stringently protects the right of consumers to pursue justice and relief.”

SJR 25 must go through the same legislative process as a bill, but is not subject to legislative deadlines and does not go before the Governor if it is approved by the Legislature.

Wieckowski has also authored SB 1241 and SB 1007, two arbitration-related bills 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.  Both bills have passed the Senate and are on the Assembly floor.

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