It took the Consumer Financial Protection Bureau five years to adopt a rule on forced arbitration by banks and credit card companies — five years of research, meetings with industry officials, public comment and crafting regulatory language.
It took a single tie-breaking vote by Vice President Mike Pence for Republican lawmakers to overturn the rule this week, denying consumers the right to band together in class-action lawsuits over possibly unfair or illegal business practices.
"The repeal of the CFPB's arbitration rule reeked of the banking industry's heavy-handed influence over Washington's politicians," said Christine Hines, legislative director for the National Assn. of Consumer Advocates.
"Wall Street's power, including its tens of millions in donations to campaign coffers, made it easy for Senate Republicans to choose big banks and predatory lenders over the rights of their own constituents," she said.
Or as Merriam-Webster puts it:
Plutocracy / noun / plu·toc·ra·cy / plü-ˈtä-krə-sē: 1. government by the wealthy 2. a controlling class of the wealthy.
The business community has lobbied fiercely for limits to class-action lawsuits that can lead to multimillion-dollar judgments or settlements.
What's particularly repulsive here is the shamelessness with which conservatives framed the debate — pretending they were saving consumers from rapacious trial lawyers rather than doing the bidding of deep-pocketed corporate backers.
They also repeatedly painted the CFPB as a "rogue agency" that was unaccountable to the American people.
The reality is that the only ones going rogue were Republican members of Congress.
The bureau was explicitly charged by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act to study use of mandatory arbitration clauses in consumer financial markets. The question was whether forced arbitration was in consumers' best interest.
Businesses have long argued that arbitration is faster, cheaper and fairer than litigation. Consumer advocates say that while arbitration has its merits, it often favors companies over customers and, as such, should be available on a voluntary basis agreed to by both sides.
The CFPB began its rule-making process in 2012 with an invitation for all stakeholders to submit input on the matter. Numerous meetings were held with representatives of the financial-services industry and their trade associations, led by the powerful U.S. Chamber of Commerce.
Bureau officials also held hearings in different cities from 2013 to 2016 to make the regulatory process more transparent to members of the public. Each hearing featured representatives of the industry and consumer groups discussing the proposed rule, and a video of each session was posted online.
Over the course of the rule-making process, over 110,000 comments were submitted by industry reps and concerned citizens.
In 2015, a more than 700-page report was issued by the CFPB summarizing its findings and explaining why class actions are an important tool for safeguarding consumers.
As one bureau insider told me, at no time was the business community excluded from the process. "They always had a seat at the table," this person said.
The CFPB adopted its arbitration rule in July. It still permitted arbitration clauses in banks' and credit card companies' contracts, but said financial firms can't prevent customers from joining class-action lawsuits.
Yet after years of regulatory due diligence, conservatives promptly attacked the decision as a slapdash move by an out-of-control federal agency.
"In the last election, the American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives," declared Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee. "I can think of no better example of such bureaucrats than those at the CFPB."
Within two weeks of the bureau adopting its rule, the House voted to repeal the measure using the Congressional Review Act, which allows lawmakers to overturn any rule written by a federal agency within 60 legislative days with just a simple majority vote. The Senate followed suit on Tuesday.
Before President Trump took office, the 21-year-old law was used only once, during the early days of President George W. Bush's administration.
Prior to this week's Senate vote, the Treasury Department took the remarkable step of issuing a report criticizing the arbitration rule as being anti-consumer.
Almost as if the Trump administration leaked the report to sway public opinion.
Do some class-action lawyers game the legal system for their own benefit? Absolutely. Do they often walk away with a big chunk of any settlement cash? Of course.
Here's the thing: At least class actions provide something for plaintiffs. Arbitration often provides bupkis, which is probably why businesses are so enamored of it.
Class actions are also one of the most effective ways of holding companies accountable for bad deeds. A $100 arbitration payment won't cause much of a ripple. a $100-million class-action settlement will make an impression.
Still, all this talk of lawyers is misdirection. The real point is how best to protect consumers from greedy banks. The CFPB, after years of testimony, research and analysis, concluded that class actions should be one possible recourse.
As soon as Trump signs off on Congress' repeal bill, the Republican Party will have ensured that businesses maintain the upper hand in any dispute.
Oxford Dictionaries has a word for that:
Screwed / adjective / skro͞od: in a difficult or hopeless situation; ruined or broken.
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