Senate kills regulation that would enable timeshare owners to sue companies over financial contracts

Senate kills regulation that would enable timeshare owners to sue companies over financial contracts

From: Timesharing Today November 8th, 2017
Senate kills regulation that would enable consumers, including timeshare owners, to sue companies over financial contracts
By Jeff Weir
WASHINGTON D.C. — A 51-50 vote in the US Senate, with the tie-breaking ballot cast by Vice President Mike Pence, just killed a new consumer protection regulation that would have made it easier for consumers to file class-action lawsuits against banks and other companies (including timeshare developers) over financial contract disputes. On a GOP party-line vote, the Senate overturned a Consumer Financial Protection Bureau regulation that banned the use of mandatory arbitration proceedings to resolve customer complaints about contracts. Arbitration proceedings are generally quicker and less expensive to litigate than a lawsuit. As a result, most major US businesses favor arbitration and oppose the CFPB’s move to limit its use. The heavily lobbied vote handed a victory to Diamond Resorts (and many banks). Diamond’s purchase contracts include a standard mandatory arbitration clause that prohibits owners from filing class-action lawsuits. Diamond’s use of the arbitration clause is already being challenged in court by an Arizona couple who previously filed a class-action lawsuit against Diamond for elder-abuse allegations. Diamond has filed court motions to dismiss the case on grounds that the arbitration clause bars the owners from filing suit. That case goes to a Nov. 17 oral argument hearing before a federal judge in Las Vegas district court.

On the night of the repeal vote (Oct. 24), US Sen. Elizabeth Warren, D-Mass, and a major supporter of the CFPB’s attempts to impose consumer protection regulations on lenders and other financial companies, said on the Senate floor that the rollback would “make it easier for financial institutions to cheat people. “Simply put, the regulation would have made it easier for consumers to file class-action lawsuits against companies that previously relied on mandatory arbitration proceedings to resolve contract disputes. Warren also called the Senate vote a “giant wet kiss to Wall Street.”In fact, this was a kiss long in the making, since President Trump and GOP lawmakers, backed by business leaders from many industries, have argued for more than a year that the CFPB’s regulatory powers should be curtailed — if not eliminated altogether. Those same lawmakers also called for the ouster of CFPB Chairman Richard Cordray, whose office, so far, is immune from legislative oversight and budgeting restrictions as a result of its creation in the so-called Dodd-Frank regulatory reform law of 2010. In the aftermath of the mortgage meltdown crisis in 2008, a Democrat-controlled Congress deliberately created the CFPB as an independent regulatory agency whose budget was guaranteed and whose Chairman, Cordray, could only be fired for cause. While many lawmakers have called for Cordray’s dismissal, Trump so far has resisted the urge to say, “you’re fired.”

An attorney, who frequently represents timeshare owners in contract disputes with developers, said that the Senate vote is a significant defeat for the CFPB and consumers in general. Corporations who tend to prey on consumers rarely cheat them out of enough money per transaction to justify filing suit. Arbitration, in certain instances, can be a positive method for resolving consumer claims, but for smaller claims, say under $50, they are hardly worth pursuing.The US Chamber of Commerce, one of the primary advocates of the repeal vote, said the CFPB’s anti-arbitration regulation would drive up the cost of doing business and increase litigation without providing real benefits to consumers. One of the major complaints from timeshare companies, in fact, is that unscrupulous lawyers file “frivolous lawsuits” to get owners out of otherwise valid purchase contracts.During the Senate debate, Warren said that “bank lobbyists are crawling all over this place, begging Congress to vote and make it easier for them to cheat consumers. President Trump, are you really going to let Mike Pence cast a tie-breaking vote to hand big banks their biggest win in Congress since they crashed the economy nine years ago?”The White House issued a statement afterward, saying Trump opposed the CFPB regulation because it would “harm our community banks and credit unions by opening the door to frivolous lawsuits.”

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