Senate’s slap at consumers
Congress has moved to protect those involved in mass corporate breaches of consumer trust such as Wells Fargo’s phony accounts and the Equifax hack. Unfortunately, it’s protecting the corporations.
The Senate voted late Tuesday to preclude classaction lawsuits on behalf of large numbers of consumers against wayward financial firms. All but two Republican senators supported the measure passed by the House in July, yielding a 50-50 split. Despite President Trump’s populist posturing that he was “not going to let Wall Street get away with murder,” it was Vice President Mike Pence who broke the tie for the banks.
Financial firms and other corporations have increasingly avoided their day in court by requiring customers to forfeit the right to sue and agree to companyfriendly arbitration of disputes. The Consumer Financial Protection Bureau, part of the Dodd-Frank Wall Street reforms that followed the 2008 crash, responded with a rule allowing class action suits, which are particularly useful when companies pilfer relatively small amounts from a lot of customers. The measure just passed by the Senate, which Trump is expected to sign, will repeal the bureau’s regulation before it takes effect.
How this happened is no mystery. Commercial banks have spent almost $50 million on lobbying this year, according to the Center for Responsive Politics, and contributed nearly $20 million to members of Congress during the last election cycle, about threequarters of which went to Republicans. Wells Fargo alone was linked to $3.3 million in federal campaign donations over the past two years. The San Franciscobased bank also ranked among the most popular investments in Congress, the center’s most recent figures show, with 55 members holding at least $3.5 million in assets as of 2015.
Wells Fargo has used arbitration clauses to kill lawsuits filed by defrauded customers before and since it acknowledged opening 3.5 million fake accounts. A new California law, sponsored by State Treasurer John Chiang and authored by state Sen. Bill Dodd, D-Napa, restores customers’ right to sue in such situations, but it’s expected to be challenged as conflicting with federal law.
Equifax initially made arbitration a condition of the monitoring and protection services it offered to 145 million Americans whose personal information was exposed by the creditreporting company’s inadequate security. It relented amid criticism.
The politicians defending such companies claim to be concerned about compounding the wealth of trial lawyers. It seems they would rather protect the wealth of financial institutions at their constituents’ expense.