American Banker: New Wells scandal harms effort to nix CFPB arbitration rule

by Jeff Sovern

Last week, Gretchen Morgenson at the Times broke the story of how hundreds of thousands of auto loan borrowers at Wells Fargo had been charged for car insurance they didn't need. Now Kate Berry at the American Banker reports on the arbitration connection: it turns out that many of the contracts provide for arbitration, meaning that injured consumers won't be able to band together in a class action. Other contracts don't include arbitration clauses, so we might have another natural experiment in which some consumers get remedies unavailable to others.  And of course, as the headline implies, yet another Wells scandal in which arbitration plays a role may have an impact on what Congress does on the CFPB's arbitration rule. From Berry's article:

"We believe the odds are now slightly against the CFPB's mandatory arbitration rule being reversed as the path to passage in the Senate has narrowed," Isaac Boltansky, a policy analyst at Compass Point Research & Trading, wrote in a note Friday. "A CRA reversal is still possible, but it is no longer probable."

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