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“They Should Stop And Take A Second Look”: Ending Forced Arbitration Is A No-Brainer For Conservatives

The Obama administration is preparing to issue consumer protection regulations that will force Republicans to choose between their Wall Street allies and the Seventh Amendment right to a jury trial in civil cases. Republicans will be tempted to denounce the new rules as yet another example of this president’s customary imperial overreach, but on this issue, they should stop and take a second look.

The problem is called forced arbitration, and if you’ve ever taken the time to read a consumer service contract or end-user license agreement before signing it (which makes you an admirable human being, and very rare), you’ll almost certainly have seen a clause that revokes your right to go to court in case of a breach of the agreement by the corporation.

Such clauses are found everywhere, from credit cards and checking accounts to cable TV and car rentals. When you sign, you agree to accept the decision of a private, for-hire arbitrator. Unfortunately, the arbitrator is usually hired by the same company that breached the agreement and is not legally required to follow statutory or common law precedents. Its decisions are almost impossible to appeal. Most consumers have no idea that’s what they’re agreeing to.

Enter the Consumer Financial Protection Bureau, which has been authorized by Congress to step in to study this problem and, based on its findings, restore Americans’ ability to hold financial institutions accountable. Under the Dodd-Frank Act of 2010, the bureau is authorized to issue regulations that limit or ban the use of forced arbitration in consumer financial services and products. Regulations to do just that are expected to be promulgated sometime this year.

The regulations may turn out to be poorly framed or excessive – we’re talking about the same administration that gave us Lois Lerner and executive amnesty, after all – but the problem Congress wanted the agency to address is real.

Recently, while traveling to Topeka on business, I needed to rent a car. I stopped at the Thrifty counter at the Kansas City airport. While filling out the usual paperwork, I asked the gentleman behind the counter, “What happens if I don’t check this box that says I waive my right to sue?” He blinked at me uncomprehendingly for a moment and then replied, “Um, it means you don’t get the car.” I checked the box, disgusted. My destination was 80 miles away, I was in a hurry, and I didn’t have time to haggle or shop around with Thrifty’s competitors, all of whom undoubtedly have the same policy.

Today, a big company like Thrifty can effectively insist that we waive our Seventh Amendment rights on a “take it or leave it” basis; and market forces are not sufficient to police the problem. We’re stuck. And it isn’t just car rentals. When you buy a hair dryer or click “I agree” to a software download, you’re probably forfeiting your right to go to court.

Statistics show that, more often than not, the arbitrator hired by the company you’re disputing with will rule in the company’s favor, likely because he’s eager to be hired again by that company in the future.

Even consumers who think they understand what they’re signing usually have no clear idea of how arbitration really works. They mistakenly equate it with mediation or some other court-like procedure. In reality, forced arbitration is conducted in secret and lacks the procedural safeguards that allow consumers to prove their case. Arbitrators typically keep their reasoning private, making it hard for the losing party to know why he lost, and results are rarely published, making it difficult for similarly situated parties to know they’re entitled to relief.

To be sure, arbitration can be a great option when it’s voluntarily agreed to by both parties after a dispute has arisen, but to be truly voluntary, all parties need to be free to say no. In the case of consumer financial services and products (the kinds of agreements the Consumer Financial Protection Bureau is authorized to regulate), most individual consumers have no bargaining power, as anyone who’s tried to negotiate with his credit card company can attest.

Voluntary arbitration agreements have always been lawful, but up until the 1920s pre-dispute arbitration clauses like the one I had to sign at Thrifty were rarely enforced by American courts. Americans have long cherished the common-law right to a jury trial in civil cases. Indeed, preserving that right was one of the top demands of the Antifederalist skeptics of the proposed Constitution, and the Seventh Amendment was ratified precisely to preserve that ancient right in the courts of the newly constituted federal government.

In 1925, Congress enacted the Federal Arbitration Act to make arbitration a viable alternative for resolving contractual disputes between corporations. That strikes me as constitutionally tolerable, so long as agreements are voluntary and the parties are of roughly equal bargaining power, and if recourse to the courts is still possible if the arbitration process itself is disputed. But recent interpretations of that act by the U.S. Supreme Court have expanded its reach to cover all kinds of contracts, including consumer and employment contracts, and have even overridden state-level laws permitting class actions. (One of the reasons most corporations favor arbitration is that it forces each claimant to pursue his claim individually.)

So in disputes between individual Americans and big companies, the Seventh Amendment has become Swiss cheese, and with more holes than cheese. Many genuinely aggrieved consumers are being denied access to the civil justice system.

How can we fix this? The Supreme Court should reverse its errors, and Congress should amend the Federal Arbitration Act to ensure agreements are truly voluntary. (A bill to do that, dubbed the Arbitration Fairness Act, has been introduced in recent Congresses, but has gone nowhere, thanks to fierce opposition by the U.S. Chamber of Commerce.) Realistically, in the near term, the Consumer Financial Protection Bureau’s forthcoming Dodd-Frank regulations are the best hope consumers have for relief. But that only applies to consumer financial services and products. So there’s no avoiding a legislative remedy.

This issue should be a no-brainer for conservatives. Ending the un-American practice of forced arbitration should be on the agenda, not just of traditional consumer advocates, but of everyone who loves liberty and the Bill of Rights. As a freedom issue, it’s right up there with things like repealing health care mandates, allowing cell-phone unlocking, ending corporate subsidies and eliminating cronyist tax breaks.

 

By: Dean Clancy, Thomas Jefferson Street Blog, U. S. News and World Report, April 17, 2015

April 20, 2015 Posted by | Conservatives, Consumer Financial Protection Bureau, Consumers | , , , , , , , | Leave a comment

“A Galloping Conservative Radicalism”: If Republicans Want Respect, They Need To Stop Using The Budget As A Weapon

One of the central provisions of the Dodd-Frank financial reform package was the creation of the Consumer Financial Protection Bureau, which is charged with preventing banks and other financial institutions from preying on vulnerable consumers. Republicans hate the CFPB, and have taken to complaining about its funding stream, which comes from the Federal Reserve rather than the normal budgeting process.

They have a point, but they have only themselves to blame, since the GOP has all but relinquished its claim to responsible oversight by using the budget to cripple laws it doesn’t like.

This steaming Washington Examiner editorial lambasting Reps. Maxine Waters (D-Calif.) and Al Green (D-Texas) is a helpful distillation of the GOP position:

Simply put, Waters and Green view the congressional appropriations process as an obstacle to doing things they judge to be good, rather than as a tool by which the American people make sure the executive branch properly enforces the laws they instructed Congress to approve. This is how a democratic republic functions. Do Waters and Green think other agencies — say, the IRS, NSA, the Department of Homeland Security or perhaps the FBI — should be similarly unaccountable to the people’s representatives?

And what will they do when, having freed the bureaucrats of congressional shackles, they find a Republican president using the CFPB in nefarious ways, with Congress powerless to intervene? [Washington Examiner]

I have some sympathy with this perspective. Putting the CFPB outside the normal budget does reduce its democratic accountability. And the agency hasn’t been covering itself with glory of late; a recent report from American Banker found systematic discrimination in hiring and promotion. It’s plausible that more oversight could have prevented that.

But the problem is that conservatives obviously aren’t concerned about whether taxpayers are getting a good deal. They want to cut the bejesus out of the agency’s funding, even if it means inviting another financial crisis. The GOP budget from earlier this year zeroed out CFPB funding after 2016. Republicans claimed they wouldn’t get rid of it altogether, but given the GOP’s animosity toward pro-consumer regulations, or any programs that benefit the non-rich, it’s easy to suspect that they are trying to quietly axe the agency.

The truth is that the strongest possible oversight authority over the CFPB — the power of life and death — is still firmly in Congress’ hands. The legislature created the agency, and it may destroy it. The trouble is that Republicans don’t have enough votes to destroy the CFPB. They don’t even have a majority in the Senate, never mind enough votes to override a guaranteed veto from President Obama.

By dividing government, the Constitution forces parties into compromise. For a normal partisan with a basic commitment to the norms of American democracy, the idea is to hammer out compromises with the other side until you are in a position to enact a suite of policies. You can’t get everything, but you can get half a loaf here and there. Then, when you get the rare chance at controlling both Congress and the presidency, you pass a big policy suite, and hope people like it enough that it sticks.

That’s a reasonably fair description of how Democrats behaved from 2006 to 2010.

But Republicans have abandoned this set of norms in favor of an enraged constitutional hardball. Under this model, when you don’t have enough votes to pass your agenda, you use every procedural tactic at your disposal to force the other side to embrace it. At the extreme, this includes threatening grievous damage to the nation, by deliberately defaulting on the debt or shutting down the government. Additionally, since what passes for Republican policy is simply repealing laws or privatizing huge swathes of the government, starving agencies for funds is a nice way to accomplish that goal on the sly.

Republicans have eased up on the government-by-hostage-crisis of late, but this behavior is what inspires Democrats to do an end-run around the budget process. Since they can’t trust Republicans to not use the budget process as part of the policy proxy war, there’s a constant search for ways to protect critical agencies from procedural extremism.

It’s not a great situation. But because our poorly designed institutions have collided with a galloping conservative radicalism, it is going to be a more common one.

 

By: Ryan Cooper, National Correspondent at TheWeek.com,  June 24, 2014

June 25, 2014 Posted by | Conservatives, Consumer Financial Protection Bureau, Federal Budget, Financial Institutions | , , , , , , | Leave a comment

“The Public Be Damned”: GOP Senators Threaten Obstruction Unless Consumer Protection Bureau Is Weakened

When the Dodd-Frank financial reform law first passed, Senate Republicans refused to confirm a director for the newly-created Consumer Financial Protection Bureau. They promised to block any nominee — regardless of that nominee’s qualifications for the job — unless the Bureau was weakened and made subservient to the same bank regulators who failed to prevent the 2008 financial crisis.

President Obama was thus forced to recess appoint Ohio Attorney General Richard Cordray to be the Bureau’s first director. Now that Obama has renewed Cordray’s nomination, the Senate GOP is again promising to block any nominee unless the Bureau is watered down:

In a letter sent to President Obama on Friday, 43 Republican senators committed to refusing approval of any nominee to head the consumer watchdog until the bureau underwent significant reform. Lawmakers signing on to the letter included Senate Minority Leader Mitch McConnell (R-Ky.) and Sen. Mike Crapo (R-Idaho), the ranking member of the Senate Banking Committee.

“The CFPB as created by the deeply flawed Dodd-Frank Act is one of the least accountable in Washington,” said McConnell. “Today’s letter reaffirms a commitment by 43 Senators to fix the poorly thought structure of this agency that has unprecedented reach and control over individual consumer decisions — but an unprecedented lack of oversight and accountability.” […]

In particular, Republicans want to see the top of the bureau changed so it is run by a bipartisan, five-member commission, as opposed to a lone director.

They also want to see the bureau’s funding fall under the control of congressional appropriators — it currently is funded via a revenue stream directly from the Federal Reserve.

Republicans want to implement a commission (instead of a lone director) and subject the CFPB to the appropriations process in order to stuff it full of appointees with no interest in regulating and starve it of funds. The other financial system regulators that have to go before Congress for their funds already don’t have the resources to implement Dodd-Frank, thanks the House GOP, leaving large swathes of it unfinished. There are also a host of other reasons that the CFPB needs to be both independently funded and have a strong, independent director.

The CFPB has done important work on behalf of consumers, winning wide praise from consumer advocates and the financial industry. Senate Republicans, meanwhile, have made it abundantly clear that they believe that blocking any and all nominees is an acceptable strategy.

 

By: Pat Garofalo, Think Progress, February 2, 2013

February 4, 2013 Posted by | Consumer Financial Protection Bureau | , , , , , , , , | Leave a comment

“Earning Their Hatred”: Exposing Republican Obstructionism

Thank God for elections and election years. An election gives our president, who must face the voters in November, permission to think and act like a partisan. It’s long overdue.

President Obama has boldly made key recess appointments to the National Labor Relations Board (NLRB) and to the Consumer Financial Protection Bureau (CFPB). The Republican strategy has been to destroy these agencies by failing to confirm appointees. In the case of the new CFPB, that meant nobody in charge to make key decisions to make the new bureau operational. In the case of the NLRB, it meant the lack of a quorum would paralyze the agency altogether.

In naming Richard Cordray to head the CFPB, the president has called the Republicans’ bluff. This was the agency that Elizabeth Warren invented and dearly hoped to lead. Republicans made clear they would block her appointment. When Obama passed her over in favor of the less-well-known Cordray, former Ohio Attorney General and also a strong consumer advocate, Republicans blocked his confirmation, too.

The selection of Cordray, an activist very much in the spirit of Warren, is in many ways a tribute to her leadership in fighting both for a strong consumer protection agency and a strong leader to head it. Cordray is that leader. Consumers will finally have an agency to keep watch for abuses that do not only harm small borrowers but aggregate to major threats to the financial system. Had there been a consumer bureau in the Warren spirit a decade ago, it would have noticed that sub-prime loans were not only ripping off homeowners but threatening to take down the economy.

In the case of the NLRB, the agency, which protects the right of workers to organize or join a union free from employer harassment, would have been totally paralyzed. The Republicans said as much. Here’s what Obama said, in naming Richard Griffin, Sharon Block, and Terrence Flynn to vacant seats on the NLRB:

When Congress refuses to act and as a result hurts our economy and puts people at risk, I have an obligation as President to do what I can without them. I have an obligation to act on behalf of the American people. I will not stand by while a minority in the Senate puts party ideology ahead of the people they were elected to serve. Not when so much is at stake. Not at this make-or-break moment for the middle class.

Well said. These actions define a president who is leading, not searching for futile compromises. It exposes both the Republican obstructionism, the unprecedented tactic of destroying agencies by refusing to allow confirmations, as well as the Republican hostility to agencies that defend regular Americans against powerful corporate elites.

Predictably, the Republicans, having invented new forms of obstructionism such as the use of the filibuster on ordinary legislation and not special cases, as well of refusal to consent to routine extension of the debt ceiling, now cry foul when Obama uses a constitutional provision, the recess appointment, which has been conventional for presidents of both parties. Their contrivance of a fake nominal session when Congress is actually in recess is shameless. The more of a fuss they make, the more they out themselves as defenders of the one percent.

As in the case of the extension of the payroll tax cut, this conciliatory president seems to be warming to the concept of maximizing partisan advantage, particularly when the Republicans hand him opportunities on a platter. Just to make sure that message did not lost, Obama chose Cordray’s hard-pressed home state of Ohio for his announcement of the appointment, and painted Republican obstructionists as allies of Wall Street.

The citizenry loves a fighter far more than a punching bag. The right hates Obama. In the spirit of Franklin Roosevelt, he might as well earn that hatred.

By: Robert Kuttner, The American Prospect, January 5, 2011

January 6, 2012 Posted by | Consumer Financial Protection Bureau, Consumers | , , , , , , , | Leave a comment

Wall Street’s Worst Nightmare: Elizabeth Warren To Run For Senate

Elizabeth Warren, consumer advocate and chief architect of the Consumer Financial Protection Bureau, will announce on Wednesday that she will run for the U.S. Senate seat in Massachusetts currently held by Republican Scott Brown.

Should Warren prevail in defeating the six candidates who have already announced their intention to compete in the Democratic primary, the result may be the greatest economic boon to Massachusetts media outlets since the days of Kennedy money as Wall Street ponies up serious bucks in an effort to defeat their arch-nemeses. Democratic contributors can be expected to respond in kind as bringing the Massachusetts senate seat back into the Democratic column is considered an important key to retaining the Democratic majority in the Senate.

While Warren is not expected to make a formal, public announcement, the Boston Globe reports that a video will go up on Warren’s website tomorrow announcing her intentions and saying, in part—
The pressure on middle class families are worse than ever, but it is the big corporations that get their way in Washington. I want to change that. I will work my heart out to earn the trust of the people of Massachusetts.

If track record counts for anything, you can believe that Elizabeth Warren will do precisely as she says. Because of that track record, the Harvard Law professor, who went to Washington and built a major following by relentlessly attacking the financial institutions for their anti-consumer agenda, will surely have the support of national progressives and Democrats, support she has unquestionably earned.

The possibility of Warren’s election presents GOP senators with a rich dose of irony. Warren was the obvious and most deserving person to serve as the first leader of the CFPB, the consumer protection agency she almost single-handedly created. However, in an effort to protect their Wall Street cronies and financial backers, the Republicans in the Senate made it very clear that her nomination would never be approved.

As the administrator of the CFPB, Warren would have been under the thumb of Congress. As a member of the Senate, it will be a very different story.
Payback can be rough.

 

By: Rick Ungar, Mother Jones, September 13, 2011

September 14, 2011 Posted by | Class Warfare, Congress, Conservatives, Consumer Financial Protection Bureau, Consumers, Corporations, Democrats, Financial Institutions, GOP, Government, Media, Middle Class, Politics, Public, Regulations, Republicans, Right Wing | , , , , | Leave a comment

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