President Trump has forgotten about the forgotten man. He's far more interested in padding the bottom lines of big banks.
Earlier this month, the Consumer Financial Protection Bureau (CFPB) finalized a new rule that bans most types of mandatory arbitration clauses, which big banks and credit card companies regularly put into their contracts with customers. Americans understandably don't often poke through the thousands of words they have to agree to whenever they open a financial account or sign up for a credit card. But these arbitration clauses are important. They prevent you from getting together with other customers to sue any company you have a dispute with.
The CFPB's new rule means big businesses can no longer shackle you with complex legalese buried in contracts you'll never read. This should be a good thing, right?
Well, the GOP was incensed.
"If allowed to take effect, the CFPB's harmful rule would benefit trial lawyers by increasing frivolous class-action lawsuits; harm consumers by denying them the full benefits and efficiencies of arbitration; and hurt financial institutions by increasing litigation expenses and compliance costs (particularly for community and mid-sized institutions)," the White House said in a statement.
This is brazenly Orwellian — especially the bit about the "full benefits and efficiencies of arbitration."
When you sign a consumer contract that includes a mandatory arbitration clause, you're waiving your right to engage in a class-action lawsuit if you feel the company has wronged you. For example, let's say you're one of the millions of people who got hit by fraudulent charges in the Wells Fargo scandal last year. And let's say you signed a contract with Wells Fargo that included a mandatory arbitration clause. The banks' lawyers could force you to not sue. Instead, you'd be forced into an arbitration process: just you, Wells Fargo, and an arbitration professional in the middle.
This would obviously be extremely advantageous for Wells Fargo or any other company. They've got lots of cash and lawyers and other resources; you're just one person with limited time and money. You're on your own, with whatever scant legal help you can afford. You probably won't be able to get yourself a good deal. You may well not even bother. The fraudulent charges you suffered were maybe a few hundred or a few thousand dollars; is getting some of it back really worth all this headache?
Class-action lawsuits get a bad rap. But they allow individuals to band together. As a group, they can achieve a level of power at least somewhat equal to the business they're battling. The damage done to them as a group can amount to millions or even billions. That's enough money to get a major corporation's attention, and force them to alter their behavior if they lose. It's also a big enough sum to attract talented lawyers who can match wits with the company's lawyers. The White House seems to think there's something untoward about benefits for "trial lawyers," but that's capitalism: Trial lawyers make their living by taking a cut of the settlements they win.
There's an additional layer of perversity here. The same GOP lawmakers who look down on Americans' penchant for "frivolous" lawsuits also oppose regulations of big financial firms and other industries. But this puts American consumers and workers in a no-win situation. Regulations and class-action lawsuits are basically two different tools for achieving the same thing: allowing the public to band together as a group, with enough economic or political resources to make powerful corporations pay a price for their misdeeds, and thus change their behavior.
Since Trump took office, Republicans have turned to a law called the Congressional Review Act (CRA) to nix a bunch of Obama-era regulations. Basically, whenever a federal agency enacts a new regulation, the CRA gives Congress 60 legislative working days to vote down the new rule. This just requires simple majorities, so the filibuster cannot be used in the Senate. It also requires a presidential signature, but as this White House statement makes clear, Trump is game. This is the tool Republicans will use to scrap the CFPB's ban on mandatory arbitration clauses.
Even worse, when the CRA is successfully used to kill a regulation, the agency is barred from ever introducing another rule that's even similar. So if the GOP pulls this off, that will be it: The CFPB's hands will be tied from ever fighting the practice of mandatory arbitration clauses again.
The CRA resolution is expected to breeze through the House of Representatives. If it dies, it will die in the Senate, where the Republicans only have a two-vote edge, and have some moderates they have to keep happy.
Killing the CFPB rule is yet another way Republicans are trying to hand an enormous amount of money and power to corporations and the wealthy, at the expense of the rest of the country. What happens next will depend largely on what GOP senators think they can get away with.