CFPB

Senate Republicans Aim to Block New Consumer Financial Protection Bureau Rule

It's the latest effort to use the Congressional Review Act to assert the authority of elected lawmakers over appointed bureaucrats.

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Ron Sachs/CNP / Polaris/Newscom

Congress has used the Congressional Review Act to repeal a variety of Obama-era rules this year. Senate Republicans now plan to use it to strike a blow against the Consumer Financial Protection Bureau (CFPB) and its director, Richard Cordray.

Cordray's bureau filed a new rule on July 10 that would stop banks, credit card companies, and payday lenders from using arbitration to settle disputes with customers, thus making it easier for consumers to take financial institutions to court. The regulation is set to take effect next March, Bloomberg reports. But only if Congress allows it.

Twenty-four Republican members of the U.S. Senate filed a Congressional Review Act (CRA) resolution yesterday that would block the rule. "Members of Congress previously expressed concerns with the proposed version of the rulemaking—concerns that were not addressed in the final rule," Sen. Mike Crapo (R-Idaho), chairman of the Senate Banking, Housing, and Urban Affairs Committee explained in a statement announcing the resolution. "By ignoring requests from Congress to reexamine the rule and develop alternatives between the status quo and effectively eliminating arbitration, the CFPB has once again proven a lack of accountability."

Some activists have jumped to defend the regulation. The Leadership Conference on Civil and Human Rights said today that the rule "helps consumers hold big banks and other financial companies accountable"; the group accused members of Congress of being in a "desperate rush" to undo it so consumers can be ripped off by financial institutions.

Such reactions ignore how the federal government is supposed to operate. It's the duly elected members of Congress who should get the final say on laws, not unelected (and potentially unconstitutionally appointed) heads of executive branch agencies who are unaccountable to the people or to other branches of government.

"Congress, not King Richard Cordray, writes the laws," said Sen. Ben Sasse (R-Nebraska) in a statement supporting the CRA resolution. "This resolution is a good place for Congress to start reining in one of Washington's most powerful bureaucracies."

The CFPB's regulation was pitched as a way to level the playing field for consumers, but the justification for the new rule is based on a single study that has been widely criticized for failing to fully consider the consequences of such a shift. It did not address, for example, whether consumers would in fact collect larger settlements after attorneys' fees were deducted from the outcome. Switching to a system that relies more heavily on the courts instead of arbitration may deliver a big payday to trial lawyers, but it would leave consumers worse off in the long term, Republican senators argue.

Under the Congressional Review Act, a simple majority of both houses of Congress can block any executive branch regulation or rulemaking within 60 days of its announcement. As Reason's Matt Welch has detailed, the Trump administration and congressional Republicans have used the act this year to wipe at least 14 Obama-era rules off the books, including:

  • The "Fair Pay and Safe Workplaces" rule, which barred companies from receiving federal contracts if they had a history of violating wage, labor, or workplace safety laws. That regulation, derided by critics as "blacklisting," was already held up in court.
  • A Bureau of Land Management rule, known as "Planning 2.0," that gave the federal government a bigger role in land use decisions. The rule was opposed by the energy industry.
  • Two regulations on measuring school performance and teacher training under the Every Student Succeeds Act, a law Obama signed in 2015 with bipartisan support.

As Bloomberg notes, there's no guarantee that the bill will pass, given the current congressional struggles over passing Obamacare and a federal budget.

Congress is also in the process of rewriting major portions of Dodd-Frank and potentially reconfiguring the CFPB. That effort, contained within the Financial Choice Act, cleared the House last month but is currently stalled in the Senate.

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  1. Evil Rethuglicans protecting their big bankster buddies again!

  2. “Congress, not King Richard Cordray, writes the laws,” said Sen. Ben Sasse

    Sasse went on to said, “In other words middle-aged Jack McBrayer, Congress ain’t your house nigger.”

    Boom.

    1. Cordray definitely looks like a guy who’s watched Hope Floats more than thirty times.

    2. The best and the brightest, right there! Why who wouldn’t trust him to look after your welfare?

  3. I don’t see why Congress has to micro-manage the bureaucracy, they can always just defund the agency if they get out of line, right?

    1. Normally, yes. This particular agency, like the CIA, is funded directly from the Federal Reserve, and thus is arguably subject to the oversight of neither the Executive nor Legislative branches. Like Dick Cheney, it forms an independent branch of government.

      1. And, just for the record, such arrangements should be illegal in my opinion.

        Just one more reason to audit the fed.

  4. I got out of the mortgage compliance game a few years back, shortly after the CFPB opened its doors. Within the first year of operation it had successfully turned mortgage servicing from something credit unions and small banks could do into a practice limited to the very biggest megabanks and sleazy multinationals. Has that changed at all? Because if not, fuck the CFPB.

  5. I can’t think of a better way to help consumers than to force them to use the speedy and efficient US court system.

  6. Pretty much a given when a third party sticks its nose in a trade between two free agents, at least one and probably both are going to lose.
    And if the third party styles itself as “The Leadership Conference on Civil and Human Rights”, it’s time to keep you hand on your wallet.

  7. Cordray’s bureau filed a new rule on July 10 that would stop banks, credit card companies, and payday lenders from using arbitration to settle disputes with customers, thus making it easier for consumers to take financial institutions to court.

    The CFPB’s regulation was pitched as a way to level the playing field for consumers, but the justification for the new rule is based on a single study that has been widely criticized for failing to fully consider the consequences of such a shift. It did not address, for example, whether consumers would in fact collect larger settlements after attorneys’ fees were deducted from the outcome.

    I was thinking the same thing when I read that first part. Why the hell do they assume that consumers would be better off going through the time, hassle, and expense of a lengthy court proceeding, one that the lawyers working for the financial institutions could drag out for as long as possible while the consumer’s attorney fees pile up higher and higher? That doesn’t make any sense.

    1. ^ This.

      As with most political bullshit the expressed intention seems to be the opposite of the truth. Arbitration clauses favor the guy with less resources. It works out for the guy with more resources as well since you save on attorney’s fees.

      In arbitration, both parties spend less, and the outcome will be reached more quickly in a manner that requires less formal legal training.

      In a lawsuit, the deep pockets win, but only after spending at least double what they would have spent losing an arbitration

      This is either a really cynical way to help out the big banks, or a really, really stupid if well-intended idea. Given Corday’s photo shared by Crusty above, I’m going with the latter.

      1. Or, of course, the usual way to help out lawyers, everyone else be damned.

      2. In a lawsuit, the deep pockets win, but only after spending at least double what they would have spent losing an arbitration

        I guess they don’t care if they end up fucking over the people their ostensibly trying to help so long as the “banksters” also get fucked over (although not nearly as hard pr as completely). In many ways, this is a microcosm of the Progressive mind-set.

        It’s just a much starker example than most. Most of the time you can at least kind of, sort of see how what they were doing could have been intended to help out the “little guy” but in this case, not even if you squint. It’s even more asinine and backwards than usual.

        1. It represents either profound ignorance of how things actually work, or an unbelievably cynical ploy to save lawyers from the scourge of arbitration. Both are terrible.

    2. does for the lawyers.

    3. It’s behind the Journal’s firewall, so instead of linking:

      “Of the 562 class actions the CFPB studied, none went to trial. Most were dismissed by a judge, withdrawn by the plaintiffs or settled out of class. The putative class victims received benefits in fewer than 20% of cases, and the average cash recovery was?wait for it?$32. Lawyers took an average 24% cut of the cash payments (about $424 million) in cases that settled.

      “Meanwhile, consumers were awarded relief in 32 of the 158 arbitration disputes the bureau examined, and rewards averaged $5,389?or about 57% of every dollar claimed. Consumers who used arbitration received relief on average in two months after filing claims. Class-action members had to wait two years.”

  8. “Such reactions ignore how the federal government is supposed to operate. It’s the duly elected members of Congress who should get the final say on laws, not unelected (and potentially unconstitutionally appointed) heads of executive branch agencies who are unaccountable to the people or to other branches of government.”
    I might be mistaken on the provenance of this specific agency, but generally speaking these agencies exist because Congress created them and delegated authority to them.

    Further, this entire article is about how Congress *does* get the final say.

    So I’m not sure what’s happening here that’s supposedly contrary to how the government is supposed to run.

    1. Did you read the paragraph before the one you quoted? The one that contains the reactions?

      1. EscherEnigma has a rare form of dyslexia where sentences that don’t conform to his preconceived notions appear to be written in Sanskrit to him.

  9. >>>”Congress, not King Richard Cordray, writes the laws,” said Sen. Ben Sasse

    Be real nice if you knocked it off for a decade or two, Ben.

  10. CFPB may be flawed, but make no mistake – the pre-Dodd-Frank status quo was in place to protect the banks and credit card companies. By _REQUIRING_ arbitration (as in: sign here or you are denied credit card/loan) the “big money” institutions effectively derail all efforts to have their systematic malfeasance offset by possible class action. That’s crony capitalism at its best: large institutions organize through industry trade groups and lobbyists and cause rules to be enacted that limit the ability of individuals to have a chance at a fair deal.

    1. How is that crony capitalism? What the fuck actually is “crony capitalism” for that matter? You mean some sort of government corruption is involved whereby banks and consumers are actually prevented by laws from making alternative forms of deals? Because otherwise, if you don’t like the contract, don’t sign it. They need to offer products people are willing to buy in a capitalist system.

      And fuck the whole class action scheme too. That just makes lawyers into billionaires to score each consumer a few bucks.

  11. CFPB is unconstitutional, and should be ended.

  12. Arbitration works when both parties have an equal footing before the arbitrator. Since the banks have the most cases,. and arbitrators are hired with the consent of the parties, the banks have much more influence both in picking the arbitrator and in getting a favorable hearing. Most arbitrations end up with split the difference decisions- neither party wins or loses everything but when a single debtor goes up before an arbitartor interested in preserving his or her relationship with the primary employer, the debtor stands to lose. Usually the banks are represented by lawyers who do nothing but appear before the arbitrator every day while the debtor, under the mistaken impression that the arbitrator is totally impartial, shows up without representation and with incomplete documentation. Case closed befroe the debtor opens his or her mouth. This is why the Consumer Protection Bureau wants people to have to agree to arbitrate. Congress, which has a long history of rewarding banks for their bad behavior should not repeal this regulation.

    1. Blind links?
      Fuck you.

  13. As an individual with a potential claim you are fucking crazy if you think you’re better off being into arbitration in disputes with banks.

    1. Based on what?
      Did you read:
      Queer and Pleasant Danger|7.23.17 @ 9:04AM|#
      It’s behind the Journal’s firewall, so instead of linking:
      “Of the 562 class actions the CFPB studied, none went to trial. Most were dismissed by a judge, withdrawn by the plaintiffs or settled out of class. The putative class victims received benefits in fewer than 20% of cases, and the average cash recovery was?wait for it?$32. Lawyers took an average 24% cut of the cash payments (about $424 million) in cases that settled.
      “Meanwhile, consumers were awarded relief in 32 of the 158 arbitration disputes the bureau examined, and rewards averaged $5,389?or about 57% of every dollar claimed. Consumers who used arbitration received relief on average in two months after filing claims. Class-action members had to wait two years.”

      And ‘everybody knows’ is not evidence, incase you’re curious; stuff your ‘obvious to anyone’.

  14. It’s fucking obvious to anyone who has dealt with litigation that being forced into arbitration diminishes the value of a claim.

  15. Government makes rules called “laws”. Most of which are outside of their Constitutional purview. Is not the contractual agreement that people make “Contract Law”?
    “Do all you have agreed to do and do not encroach on other persons or their property”,,, this is the closest statement of LAW that I have seen. All the rest are rules/”laws”.

    What part of corruption is it when the lobbyists become the members of the agency’s? How much does it cost to,,, influence our congressional help to have rules/”laws” passed that protect the industries that prey and harm others through “legislation”, decree, or “rulings”?

    Until we institute a bottom line LAW, nothing other than the continual transfer of wealth to the well heeled will happen. That is the purpose of government and agency’s in this “modern” world.

    1. “Is not the contractual agreement that people make “Contract Law”?”
      No.

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