Sen. Tim Scott (R-SC) was one of the sponsors to eliminate the ruling. File photo
Since its introduction in July, the Consumer Financial Protection Bureau's (CFPB) ruling that prevents class-action waivers in almost all instances of financial consumer-service agreements has been met with opposition from financial institutions and politicians.
Sen. Tim Scott (R-SC) was one of the sponsors to eliminate the ruling, having claimed that the CFPB had "overreached with misguided efforts," as stated in a previous interview with Palmetto Business Daily.
Scott's sentiments have been echoed by SC Bankers Association's President and CEO Fred Green III, who explained why removing arbitration as an option for consumers was harmful.
"The CFPB conducted a study and it showed the benefit of consumers under arbitration and then consumers under class action, and it's overwhelmingly in favor of arbitration," Green told Palmetto Business Daily.
The CFPB study found that consumers who prevail in arbitration recover, on average, more than $5,000, while class action settlements recover an average of $32 for a consumer and $424,000 for attorneys.
"It isn't fair to the consumer, it's unfair to the financial institutions because now it's not the cost issue as much as the tracking and compliance cost associated with monitoring the accounts that were set up prior to this ruling and those afterwards and any changes in between," Green said. "There's a pretty big administrative cost to financial institutions with no benefit to the consumer . . . the ones that really benefit would be the class-action lawyers."
Green stated that Sen. Lindsey Graham (R-SC) seemed to be siding with Democrats on the ruling, as various sources corroborated. Since then, Graham has released a public statement on the ruling, claiming that he was not in support of the CFPB.
"You've had banks and credit-card companies nickel-and-diming consumers, and one of the things that makes them think twice is the idea of a massive lawsuit," Graham said.
As stated in letter from SC Bankers and 49 other bankers associations, to the Majority Leader Mitch McConnell (R-KY) and Minority Leader Charles Schumer (D-NY), "If allowed to take effect, the Rule would create a windfall for unscrupulous class-action attorneys, provide litter or no relief to harmed consumers, and effectively eliminate an accessible alternative to the often-daunting judicial system."