Finally, a win for consumers

Dderegulatory push from the Trump administration and the GOP-controlled Congress, the Consumer Financial Protection Bureau rolled out a much-needed rule this week that bars banks and other financial services companies from forcing customers to take disputes to arbitration instead of banding together to sue.

Some Republicans in Congress, however, are already readying legislation to cancel the rule preemptively and stop the agency from ever adopting anything like it. But that may be the least of the bureau’s problems at the moment. The House has passed a bill (HR 10) that would all but gut the bureau, removing crucial regulatory tools and enforcement powers as well as ending its independence.

Nevertheless, the arbitration rule is a timely reminder of why we need a strong and independent CFPB tackling problems that other financial regulators have ignored. Arbitration is fine as an optional alternative to lawsuits, but banks and other financial services companies have been routinely requiring customers to submit any and all disputes to binding arbitration. They’ve then used those clauses to stop customers from joining forces in class actions, which makes it pointless for consumers to pursue claims when their losses are smaller than the cost of an arbitrator. In effect, that gives companies carte blanche to cheat and defraud on a wide scale, as long as they don’t take very much from any individual.

Defenders of forced arbitration argue that frivolous class-action suits drive up everyone’s costs. But the solution to that problem is to adjust the rules for such claims, not to deny people the only effective means they may have to redress their complaints — a right guaranteed by the Constitution.

Protecting fundamental rights should appeal to the self-proclaimed “constitutional conservatives” on Capitol Hill. How they end up treating this rule, and the bureau itself, will measure whether they value their constituents more than corporate profits.