House Republicans are holding a hearing Wednesday afternoon in their desperate search to undercut the entity that was created by Dodd-Frank to protect consumers from lenders: The Consumer Financial Protection Bureau (CFPB). At issue is the CFPB’s proposed regulation change that would prohibit financial institutions—including banks, credit card companies, payday lenders, and mortgage companies—from adding an arbitration clause to their contracts that prevents consumers from going to court as part of class action lawsuits.
Why the change? Because consumers acting as single agents are generally unlikely to discover they’ve been cheated by a financial institution and, even if they do, their likelihood of pursuing a remedy on their own through arbitration is also greatly diminished. In other words, forced arbitration makes it super easy for financial institutions to scam customers with little to no downside.
Republicans, naturally, are painting elimination of the clause as a “big wet kiss” to trial lawyers. And in the lead up to the House Financial Services Committee meeting, the Wall Street Journalhas charged that the government is forcing a regulation change that consumers haven’t even asked for.
The government’s own research shows that consumers aren’t demanding this new regulatory assault on U.S. markets.
Goodness, an “assault!” Can’t imagine why people aren’t widely clamoring to change a fine-print clause that mostly goes undetected by consumers—until they have cause to try to use it.
Anyway, Republicans are digging and prior to Wednesday’s meeting they reportedly asked that the CFPB turn over all communications the agency had with Public Justice, a consumer advocacy group. The clear hope is that the interactions will reveal the evil plot between CFPB officials and advocates to come up with a rule that would be a windfall for trial attorneys (heh, heh, heh). As it turns out, the CFBP actually met with financial services representatives at least 130 times, so they had plenty of input regarding the new rule.