The last thing Republicans on Capitol Hill apparently want the Consumer Financial Protection Bureau to do is actually protect financial consumers. That would explain the angry GOP reaction whenever the bureau announces new rules, such as one this week to stop big financial institutions from imposing mandatory arbitration agreements on consumers who have legal grievances.
The bureau is responding to thousands of nightmarish reports about the many ways banks, lenders and credit card companies cheat consumers and then use legal trickery to avoid being held accountable in court.
Banks have issued credit cards to customers without their consent. Others have signed clients up for loans or accounts that they didn’t ask for, on terms they never agreed to. Still others have imposed fees, boosted interest rates on loans or modified mortgage terms without notice or consent.
When customers complained, they were frequently told to read the fine print of their agreements, which requires all disputes to be resolved through arbitration. The arbitration process can be expensive for individuals, who must hire their own lawyers to confront a corporate behemoth. Arbitration is often unfair and designed to work to corporations’ advantage, which is the whole reason businesses increasingly require it.
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Arbitration agreements can specifically prohibit customers from banding together and filing class-action lawsuits. The Consumer Financial Protection Bureau, established in the wake of the 2007-2008 financial meltdown, now says class-action lawsuits may go forward anyway.
This is only fair. If banks and other credit providers abuse customers as a group, those harmed should be able to fight back as a group. Had the CFPB not taken its action, banks and credit providers would be able to continue abusing and bullying consumers with impunity.
Key House Republicans believe, however, that it’s the CFPB, not banks and credit companies, that needs restraining. “The rule should be thoroughly rejected by Congress,” said Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, referring to the new arbitration policy.
Rep. Ann Wagner, R-Mo., has waged political warfare against CFPB director Richard Cordray and his bureau’s independent investigatory and regulatory authority. “Now, more than ever, we have a new obligation to examine the checks and balances of our federal government and ensure that our Constitution is reflected by it. … Nothing embodies the Washington-knows-best mindset more than the Consumer Financial Protection Bureau,” Wagner stated in March.
Rep. Blaine Luetkemeyer, R-Mo., has confronted Cordray on proposed rules to tighten standards that would protect borrowers from predatory practices by payday lenders.
Exactly whom they’re fighting for isn’t quite clear, but it’s sure not consumers victimized by financial corporate behemoths. All the companies want is their unfair advantage. It’s strange the lengths to which some in Congress will go to fight against the little guy.