For many of us it may be the most important contract we ever sign. It’s the contract that sets the terms for what often is our single largest investment – our home.
But what happens if the bank that holds our mortgage tries to cheat? What if they improperly hide fees, or raise rates or even try to foreclose on the property illegally? Banks have sought to protect themselves by inserting “forced arbitration” clauses into mortgages and home equity loans.
As we’ve noted previously on this Blog, under forced arbitration, consumers who buy defective products or are overcharged for services are barred from taking their cases to court. Instead, they must use a private arbitration firm chosen and paid for by the business itself. These clauses also often ban class actions, which allow individuals to band together to bring their common claims.
Having a dispute settled by arbitration is like playing a baseball game in which the other team hires, fires – and pays – the umpires. One study of top arbitrators for one major arbitration firm found that they rule for the corporations that hire them 93.8 percent of the time.
But Congress drew the line at home mortgages. Section 1414 of the Dodd-Frank Wall Street Reform and Consumer Protection Act bans forced arbitration in mortgage disputes. Regulations implementing the law had to be issued by an agency created by that law – the Consumer Financial Protection Bureau. Those regulations took effect June 1. Section 1028 of the Act also mandates that the CFPB study and report to Congress on “the use of agreements providing for arbitration . . . in connection with the offering or providing of consumer products or financial services.”
You remember the CFPB. That’s the agency Republicans hate so much that they’ve vowed to filibuster anyone President Obama nominates to run it unless the President agrees to eviscerate Wall Street reform. That includes the current agency director, Richard Cordray, named to the position through a recess appointment that was called into question by a ruling of the D.C. Circuit Court of Appeals.
The new forced arbitration regulation makes clear what this fight and the other fights over President Obama’s nominees really are all about. They’re about Republicans who can’t stand Wall Street reform or consumer protection or anything that gives everyday Americans a fighting chance against corporate special interests.
That’s why the fights ahead over Cordray, and President Obama’s nominees to the D.C. Circuit and his nominees for posts like Secretary of Labor, Environmental Protection Agency Administrator and the National Labor Relations Board, are so important. That’s why, if Senate Republicans refuse to allow yes-or-no votes on these nominees, the Senate majority needs to revisit reforming Senate rules.