GOP out to back banks, void rule

Ar­biters best, not suits, they as­sert

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - KEVIN FREKING

WASH­ING­TON — Con­tin­u­ing its fo­cus on curb­ing gov­ern­ment reg­u­la­tions, a Repub­li­can- led House is seek­ing to over­turn a rule that would let con­sumers band to­gether to sue their banks or credit-card com­pa­nies rather than use an ar­bi­tra­tor to re­solve a dis­pute.

The Con­sumer Fi­nan­cial Pro­tec­tion Bureau fi­nal­ized the rule just two weeks ago. It bans most type of manda­tory ar­bi­tra­tion clauses, which are of­ten found in the fine print of con­tracts gov­ern­ing the terms of mil­lions of credit-card and check­ing ac­counts.

Repub­li­can law­mak­ers, cheered on by the bank­ing sec­tor and other lead­ing busi­ness trade groups, have wasted no time seek­ing to undo the rule be­fore it goes into ef­fect next year. They’ll suc­ceed if they can get a sim­ple ma­jor­ity of both cham­bers of Congress to ap­prove the leg­is­la­tion and Pres­i­dent Don­ald Trump to sign it. The num­bers are likely on their side, just as they were ear­lier this year when Repub­li­cans led ef­forts to up­end 14 Obama-era rules.

Repub­li­can law­mak­ers de­scribed the rule as a bad deal for con­sumers but a big win for trial lawyers. They said the av­er­age pay­out in a class-ac­tion law­suit was just $32 while the pay­out for the

at­tor­ney in the case was nearly $1 mil­lion.

“Ar­bi­tra­tion is an al­ter­na­tive to the ju­di­cial sys­tem, and it of­fers re­sults and a bet­ter out­come for con­sumers,” said Rep. Ken Buck, R-Colo. “Ar­bi­tra­tion al­lows par­ties to use an in­de­pen­dent me­di­a­tor in­stead of hir­ing ex­pen­sive lawyers to set­tle a dis­pute.”

Demo­cratic law­mak­ers are fight­ing to keep the rule. They said the point of par­tic­i­pat­ing in a class-ac­tion law­suit is gen­er­ally to pur­sue re­lief from small fi­nan­cial in­juries — the kind that would not be worth the time and ex­pense for some­one

to pur­sue on their own through the le­gal sys­tem. Sen. El­iz­a­beth War­ren, D-Mass., said that when a whole lot of peo­ple get hurt in the same way, they should have a chance to join to­gether to pur­sue re­dress.

“If you’re go­ing to cheat peo­ple, there’s go­ing to be some ac­count­abil­ity,” War­ren said. “That’s what this pro­vi­sion is all about.”

Demo­cratic law­mak­ers framed the de­bate as Repub­li­cans stick­ing up for pow­er­ful fi­nan­cial com­pa­nies at the ex­pense of con­sumers who of­ten are out­gunned and out­num­bered in their dis­putes with banks and other cred­i­tors.

“It sadly re­flects a Repub­li­can Party that works re­lent­lessly

to em­power Wall Street and to rig the sys­tem against con­sumers,” House Mi­nor­ity Leader Nancy Pelosi, D-Calif., said of the re­peal ef­fort.

Repub­li­cans por­trayed ar­bi­tra­tion as a su­pe­rior op­tion for con­sumers and said that the Con­sumer Fi­nan­cial Pro­tec­tion Bureau’s ac­tion could force banks to hold greater re­serves to pre­pare for fu­ture lit­i­ga­tion. The money could in­stead be used to lend out to small busi­nesses and fam­i­lies.

The con­sumer pro­tec­tion agency es­ti­mated that the cost of com­ply­ing with the new rule would be less than $500 mil­lion an­nu­ally for banks. The agency also said that banks gen­er­ated more than $171 bil­lion in prof­its in 2016.

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