Normally, Republicans are in favor of giving consumers more choices.
Normally, Republicans are all about law and order.
And normally, Republicans claim to be strong defenders of the Constitution.
For some reason, though, the idea of giving consumers the choice to participate in a court of law — a right enshrined in the Seventh Amendment — leaves some GOP legislators quaking in their loafers.
That’s the implication of a resolution introduced in both the Senate and House on Thursday. While you were busy pondering President Trump’s views of Napoleon, members of Congress were working to keep you from your day in court.
Here’s the context.
When you get a new bank account, credit card, payday loan or auto lease, there’s a lot of fine print. Often, the fine print says that if the company harms you — say, charges you a questionable hidden fee, blocks your ability to access your own money or opens a sham account in your name without your knowledge — you can’t sue it in court.
Instead, you have to resolve the dispute outside the court system, bound by a decision made by a private individual rather than a judge or jury. Sometimes this private individual, called an arbitrator, is selected and paid by the very company that you believe ripped you off.
Which does not exactly suggest they’re a neutral party.
Another consequence of this fine print — called a “forced arbitration clause” — is that it prevents you from bringing or joining a class-action suit against the company that harmed you. That’s true no matter how many other people were victimized by the exact same company, even if they were victimized in the exact same way.
Wells Fargo, for example, opened millions of fake accounts in the names of unsuspecting customers. But because these consumers had other accounts that included forced-arbitration clauses, Wells Fargo repeatedly tried to use this fine print to block class-action suits over those bogus accounts.
The Wells Fargo case is perhaps the most notorious recent example, but there are lots of others. Tens of millions of Americans are bound by these forced-arbitration clauses, according to the Consumer Financial Protection Bureau (CFPB). The vast majority don’t realize they’ve signed away their rights until something goes wrong.
Removing the ability to join a class-action suit is a big deal. Joining others who have been harmed is often the only sensible strategy if the harms are small but widespread.
As federal Judge Richard Posner once wrote, “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”
Once upon a time, Congress recognized that the proliferation of mandatory-arbitration clauses was a problem.
As part of the 2010 Dodd-Frank law, Congress gave the newly created CFPB the authority to ban or limit forced arbitration in connection with consumer financial products or services, though the law said the agency had to do a study first.
Since then, the CFPB has conducted two studies examining the prevalence of these clauses, and their effects on consumers and the financial system. After an extended comment period, the agency issued a final rule this month saying such clauses can no longer be used to block class-action suits.
Consumers can still go through arbitration if they wish. But they also now have the option of banding together with other consumers if a lot of people have been hurt similarly.
In other words, the CFPB gave consumers more choices.
Which, again, sounds like something Republicans should support.
Instead, on Thursday, Sen. Mike Crapo (R-Idaho) and Rep. Jeb Hensarling (R-Tex.) announced legislation to kill the CFPB rule using the Congressional Review Act, which allows Congress to nullify executive-branch regulations by a simple majority vote, so long as they act within 60 legislative days.
The Trump administration also appears to be developing a Plan B, should Congress not act in time.
A Trump appointee, the acting comptroller of the currency, has suggested he might try to obstruct the rule through a regulatory route, based on the absurd argument that the rule could threaten the stability of the financial system.
Note that the CFPB’s rule only applies to financial products and services, since those are what falls under the agency’s jurisdiction. The Trump administration has meanwhile also begun to repeal or reexamine other Obama-era regulations designed to curb forced arbitration for disputes involving nursing homes and for-profit schools.
So much for the president’s pledge to look out for the little guy.
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