Senate approves Wieckowski resolution supporting new consumer protection rule

SJR 25 urges the federal Consumer Financial Protection Bureau to adopt proposed rule

August 11, 2016

SACRAMENTO – The California State Senate today passed Senate Joint Resolution 25 by State Senator Bob Wieckowski (D-Fremont) urging the federal Consumer Financial Protection Bureau (CFPB) to issue a final rule protecting consumers’ rights to band together in order to pursue justice and deter unethical business practices.  The resolution now heads to the Assembly.

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.    

“I applaud my colleagues in the Senate for taking this step to urge federal action because consumers are victimized by the illegal practices of companies and they should have the right to come together as a class to hold corporations accountable and deter financial abuses,” said Wieckowski, a member of the Senate’s Judiciary Committee. “Consumers wanting modern goods and services should not lose their right to go to court as a group and seek redress for getting ripped off.”

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.

When it issued the proposed rule 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 is supported by a growing 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.

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 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.  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.