As Lisa Servon writes in her thorough survey for the Prospect’s summer issue of the Consumer Financial Protection Bureau’s prospects under the Trump administration, “It took Congress 66 years to undo Glass-Steagall in 1999. It may take less than a decade to undo the reforms brought about by Dodd-Frank, including the CFPB.”
It may take the Republican-controlled Congress even less time to undo a landmark rule issued Monday by the consumer watchdog agency that will widely forbid mandatory arbitration clauses in consumer contracts. Banks, credit-card companies, and other financial-services firms will no longer be able to force individual consumers into corporate-friendly mandatory arbitration hearings to settle disputes.
For instance, Wells Fargo used arbitration clauses as a way to block a potentially gigantic class-action lawsuit from depositors who found that the bank had created fraudulent accounts for them just to juice its numbers. Most customers are unlikely to undertake a time-consuming arbitration process on their own to recoup a couple hundred bucks. As a result of the CFPB’s new rule, however, consumers will once again be able to join together in class-action lawsuits to address corporate malfeasance.
Since its inception, Republicans have cast the CFPB as a liberal, job-killing, over-regulating, big-government boogeyman—a “rogue” agency with too much power and too little accountability. Meanwhile, the agency’s enforcement initiatives have returned almost $12 billion to some 27 million consumers who were defrauded in the marketplace.
So it comes as no surprise that leading Republicans in Congress immediately called for the rule to be repealed through the Congressional Review Act (CRA), an obscure provision that allows Congress to repeal recent regulation with simple majorities, avoiding the typical 60-vote threshold in the Senate. Republicans have used the CRA to eviscerate more than a dozen late-term rules enacted by former President Obama.
Texas Congressman and House Financial Services Committee Chairman Jeb Hensarling quickly issued a statement declaring that, “In the last election, the American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives. Congress must work with President Trump to make good on this mandate by fundamentally reforming the CFPB and dismantling the Administrative State.”
Hensarling, who is one of Wall Street’s fiercest allies and who has taken millions in campaign contributions from companies that would be impacted by the arbitration rule, has repeatedly used his chairman’s megaphone to condemn the CFPB. He’s called for an end to its independent status by replacing its single director with a commission, bringing its funding under Congress’s purview (it is currently funded through the Federal Reserve), and neutering its enforcement capabilities.
Arkansas Senator Tom Cotton also called on Congress to immediately repeal the rule using the CRA. “The Bureau’s new rule on arbitration clauses ignores the consumer benefits of arbitration and treats Arkansans like helpless children, incapable of making business decisions in their own best interests,” Cotton said. “The last thing Americans need is more anti-business regulation that will prompt frivolous lawsuits while hurting consumers.”
Let’s be clear: This isn’t about the “Administrative State” or, as Cotton absurdly accuses, about demeaning consumers’ intelligence. It’s about a rule that stops an increasingly prevalent, insidious tactic by big corporations that want to avoid accountability for fleecing workers and consumers alike.
The rule would shift the scales of the market a little by bolstering consumers’ ability to get fair treatment, and preserve one of the only ways consumers can exercise power, which is en masse, through class-action suits.
Rather than draining the swamp, Cotton and Hensarling are carrying water for Wall Street. Talk about demeaning Americans’ intelligence! Of course, it’s swamp-drainer-in-chief Donald Trump who’s leading the charge on this. Just two weeks ago, his Justice Department took the extraordinary action of switching the White House’s position (formulated by the Obama administration) on an impending Supreme Court case dealing with mandatory arbitration. Trump, of course, is siding with the corporation.
Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.