Consumer Financial Protection Bureau Director Richard Cordray rolled the dice with a measure of top importance to consumer advocates, but they say they are happy with his bet and optimistic it will pay out.
By finalizing a rule meant to facilitate class-action lawsuits in consumer finance, Cordray allowed for the possibility that the Republican-led Congress could overturn it through the Congressional Review Act. For fans of the new rule, such a repeal would be worse than no rule at all: Under the Congressional Review Act, the agency could not write another rule on the same issue unless Congress passed a law allowing it to.
From the perspective of consumer groups, Cordray effectively wagered that Senate Majority Leader Mitch McConnell would not be able to hold his caucus together to repeal the rule. He did so under threat of contempt proceedings from a top House Republican and amid increasing speculation that he may soon leave the agency to run for governor of Ohio.
Although Republicans have been successful in repealing 14 Obama-era regulations through the Congressional Review Act, consumer advocates are happy with the gamble.
“You can’t win a fight that you don’t enter,” said Ira Rheingold, executive director of the National Association of Consumer Advocates, casting the move as a no-brainer after years of groundwork laid by consumer advocates.
Rheingold called the bureau’s arbitration rule an “essential part of consumer protection.” The regulation would prevent banks and other financial firms from inserting clauses into contracts that force customers into private arbitration to resolve disputes. Crucially, that prohibition would mean that consumers would be able to join in class-action lawsuits.
That’s a priority for consumer advocates, who fear that Wall Street has grown in power by inserting mandatory arbitration clauses in customer contracts. They are quick to cite the experience of Wells Fargo customers who suffered through the fake accounts scandal.
Those are the kinds of customers at issue. People who suffered harm amounting to tens or hundreds, not thousands of dollars, don’t have the ability to hold giant corporations accountable on their own, consumer groups say, but can do so through class action.
House Republicans, who held a press conference at the Capitol Thursday to announce the resolution to stop the rule, charged that it would benefit trial lawyers, not consumers.
Under the Congressional Review Act, the resolution can reach President Trump’s desk with 51 votes in the Senate. Still, McConnell could lose at most two Republicans and pass the resolution, assuming that no Democrats join it.
“I’m worried about the fight, but I like our chances,” said Lauren Saunders, associate director at the National Consumer Law Center.
Advocates see possible “no” votes among moderate Republicans.
On Thursday, every Republican member of the Senate Banking Committee expressed support for the resolution disapproving the rule, with the conspicuous absence of Louisiana Sen. John Kennedy. He is still reviewing the measure, his office said Friday.
