Democratic legislators in California are seeking to enact a new rule to allow consumers of financial products to litigate all contractual disputes, even in cases involving valid contracts that hold arbitration provisions both parties have previously given their consent.
Similar to the Consumer Financial Protection Bureau (CFPB) rule, Senate Bill 33, which has already passed the Senate and moved on to the General Assembly, will allow consumers to litigate their cases in an open court of law. The action is largely seen as a way of countering the Trump administration’s effort to chip away at many of the environmental policies ad financial regulation initiatives instituted during the two terms of President Barack Obama.
Maryann Marino
The SB 33 push also comes just as congressional Republicans were mounting an effort via the Congressional Review Act to undo the CFPB.
Democrats have defended the bill as a means of thwarting developments such as the recent Well Fargo bogus account scandal, where bank staffers systematically used the personal information of existing customers to open other accounts in their names without their knowledge or permission. Once the fraud became known to customers, bank officials would then point to the arbitration language in their original contract as a means of preventing them from filing suit against the bank.
The bill has the support of state Treasurer John Chiang as well as organizations such as the Consumer Federation of California.
Meanwhile, California Citizens Against Lawsuit Abuse regional rirector Maryann Marino thinks everyone would be better served by a plan that more thoroughly takes every avenue that stands to be impacted into account.
“California Citizens Against Lawsuit Abuse supports arbitration over litigation,” she told the Northern California Record. “The outcomes are resolved more quickly, are less expensive and consumers tend to be made whole at a higher rate than being part of a class action lawsuit where the attorneys profit and the plaintiffs receive pennies.”
Although Marino couldn’t be much clearer in showing what side of the aisle her organization stands, what remains a mystery is the position of Gov. Jerry Brown who has been mum on the issue.
Brown previously vetoed the somewhat similar AB 465 bill, which would have made California a trailblazer in banning the use of mandatory arbitration provisions as a condition to employment.