News Room

Consumer Protections Run off the Rails

Written on behalf of Brian S. Kabateck
December 2017

With a major leadership shakeup at the nation’s top consumer watchdog agency, regulatory enforcement is being run off the rails as the Trump administration makes its mark on the Consumer Financial Protection Bureau. Last month, Mick Mulvaney took the reins of the agency and is quickly reversing course on punishing deceptive and fraudulent business practices.

A new filing by the CFPB puts a 30-day freeze on all regulatory action, which includes failing to enforce punishment against Nationwide Biweekly Administration Inc. The agency recently declared the company didn’t need to put up a bond for $8 million in civil penalties for its aggressive telemarketing and infomercial campaigns aimed at convincing home owners with mortgages to enroll in a deceptive program called the “Interest Minimizer.”

An investigation revealed that Nationwide duped homeowners into paying biweekly instead of monthly and instead of helping consumers pay off their mortgage faster, the corporation kept the first payment as a fee and charged additional fees per payment. The CFPB wrote in its complaint, “Nationwide’s customers did not save $161 million in interest charges in 2013. But the company did collect $49 million in fees between 2011 and 2014.”

Congress decided to make it easier for companies like Wells Fargo and Equifax to cheat and steal from consumers and face zero consequences. President Trump decided to forsake the very people who voted for him–the American people, who are being run roughshod over by banks and other corporations that will never be held accountable because of forced arbitration. Consumers will now have a harder time fighting huge financial corporations over their wrong-doing. Congress voted to repeal a government rule that gave consumers the right to join in class-action lawsuits against financial lending corporations. The rule comes after President Trump had reported that he was rolling back on the vote that was given to big financial conglomerates. The Senate’s vote to kill a rule that would allow consumers to file class-action lawsuits over disputes with banks, credit card companies and other financial service firms means that cases will now be resolved through arbitration.

Credit card companies and other financial corporations have inserted arbitration clauses into their fine print of financial contracts to bypass the courts and prevent people from pooling their resources into class-action lawsuits. The clauses take away the right for individuals to be able to fight predatory and deceptive business practices by forcing people into private arbitration. An example of this is when Wells Fargo was sued for opening millions of fraudulent savings and checking accounts on behalf of their customers. The lawsuit was blocked by arbitration clauses that pushed individual consumers into closed-door proceedings.

Opponents of the arbitration rule claim that plaintiffs are better off filing an individual lawsuit instead of joining a group lawsuit because the average payouts are higher in individual suits. That’s because very few people go through arbitration, and they generally do so only when thousands of dollars are at stake, whereas the typical group lawsuit seeks to recover small amounts for many people. Almost nobody spends time or money fighting a small fee on their own. When a bank charges illegal fees to millions of customers, and then blocks them from filing a lawsuit together, the result is not individual claims–instead, it comes out to zero claims.

Not only do group lawsuits help consumers recover money they otherwise would forfeit, but they also protect many more consumers by halting and deterring harmful behavior. For example, when banks reordered bank debits to charge more overdraft fees, consumers sued and recovered $1 billion. Most banks have stopped this practice. In November, the CFPB rescinded the rule that it had established in July, stating that it would be removing it from its code of federal regulations.

Consumer protection laws are designed to ensure the rights of vulnerable consumers in society. The laws are a form of government directive intended to protect the rights of consumers. Our firm is committed to standing up to big businesses that engage in fraud or unfair practices from gaining an advantage over competitors. This includes protecting the public from false or misleading advertising in situations like “bait and switch” advertising tactics, warranty misrepresentation, defective products, forced arbitration clauses and identity theft. Class action lawsuits can provide recourse for consumers whose rights have been violated by companies that engage in abusive business practices.

If you believe you and many others like you have been somehow injured, cheated, or otherwise harmed by unfair business practices, give us a call and let us help you protect your rights. At Kabateck LLP, we can help you explore all of your options and ultimately achieve for you the maximum compensation for your harm.