For markets to work, you need a system where either the government protects consumers or consumers can adequately defend themselves. Or both. But you can’t have neither. The “neither” option lands you in a kleptocracy, which is basically where Republicans have been leading the country for the past few years.
Happily, a new bill — introduced by Democratic lawmakers last week — would restore at least some of consumers’ diminished tools for self-defense.
Republican politicians love to talk about their deregulatory successes. They’re not exaggerating: Under President Trump’s leadership, Republicans have repealed or watered down tons of federal rules. If you look through a list of these deregulatory efforts, you’ll notice a striking pattern: Many of them loosen the limits for how much harm businesses can inflict upon consumers.
There are many changes allowing more pollution, for instance.
These include the relaxation of Obama-era standards on coal-ash disposal, which makes it easier for arsenic, mercury and lead from power plants to potentially leak into the water supply. Or another proposed rule allowing coal-fired power plants to release more fine particulate matter into the air.
And there are the many decisions to simply stop enforcing laws and regulations still on the books.
The Consumer Financial Protection Bureau, for instance, suspended examinations of financial firms for compliance with the Military Lending Act, which protects servicemembers and their covered dependents from financial predators.
The Education Department has likewise failed to punish the misbehaving student-loan servicers it supervises, as a recent inspector general report found. Even as it remains asleep as the switch, the department has tried to block other regulators and state law enforcement officials from taking action against loan servicers accused of cheating consumers.
If you’re a conservative, you might argue that protecting consumers is not the government’s role; in a free market, consumers should look out for themselves. If they have been harmed, they can seek redress through the courts.
In fact, a Nobel Memorial Prize in Economic Sciences was awarded for precisely this insight: You don’t need burdensome government regulations if you have strong property rights and the frictionless ability to sue over those rights.
The prototypical example, which you might recall from a long-ago economics course: You can have either strong pollution regulations or strong property rights so that fishermen downstream can easily recoup their costs if all their fish die thanks to water pollution. Either should prevent plants upstream from dumping stuff in the river.
But at exactly the same time that Republicans have been rolling back supposedly burdensome regulations, they have also been making it harder for downstream victims to seek redress.
For instance, Trump has been trying to eliminate all federal funding for the Legal Services Corporation. This congressionally established nonprofit funds legal-aid programs that help about 2 million low-income Americans seek civil justice each year.
Republican lawmakers have also tried to cap the amount of money that consumers hurt by financial institutions can be awarded even when they’re successful in court. In fact, on the same day in 2017 that Equifax announced its massive data breach — which affected some 143 million Americans — the GOP-controlled House held a hearing on a bill to cap damages in class-action lawsuits against credit bureaus.
But perhaps where the GOP has been most successful in curbing consumers’ ability to fight back relates to mandatory-arbitration clauses.
This refers to language, typically buried in fine print, that forces you to give up your right to sue. If you’ve taken out a credit card, purchased a phone plan, checked a loved one into a nursing home or even just accepted a new job in the past few years, chances are you’ve agreed to these nonnegotiable terms — putting you at a serious disadvantage if you’re harmed.
This is not only because that bank or employer or phone company is likely bringing repeat business to the arbitrator handling your case, making them more likely to find in the company’s favor. It’s also because you’ve probably waived your rights to join a class-action suit, even if there are lots of people injured in the same way you were. When harms are small but widespread, banding together with others is often the only sensible strategy.
Republicans have repeatedly killed, undermined or delayed Obama-era regulations designed to curb forced arbitration for disputes involving financial institutions, nursing homes and for-profit schools. But last week, more than 150 Democratic lawmakers signed on to legislation to eliminate mandatory-arbitration clauses in consumer, employment and civil rights cases (although parties could still voluntarily agree to arbitration after a dispute occurs).
If the bill passes, it would be a step in the right direction. In the best of all possible worlds, the government would also help protect customers from misbehaving companies. At the very least, though, it shouldn’t be protecting misbehaving companies from their customers.