By Rick Manning
As originally published at http://thehill.com/blogs/pundits-blog/finance/342800-warrens-consumer-financial-protection-bureau-setting-dangerous?#_=_
Sen. Elizabeth Warren‘s government-run-wild brain child is continuing its left-wing sprint into the Trump era, and only Congress can stop its usurpations.
The Consumer Financial Protection Bureau (CFPB), the agency created by then-Harvard law professor Warren in the Obama years, effectively to enact liberal policies without new legislation or executive branch oversight, has issued a new rule that is the essence of lawmaking by regulation, something the Founding Fathers attempted to prevent through the Constitution’s design.
With the new law-by-regulation set to go into effect in only 60 days, Congress has a narrow window to rescind it under the Congressional Review Act, by far the easiest, fastest and cleanest way to give the CFPB the brush back it quite obviously needs. And Congress is well practiced at using this tool to rescind regulations having rescinded 14 midnight regulations promulgated by the Obama administration in the waning days of their term.
The rule in question would prohibit consumers from agreeing to use arbitration (waiving their ability to join class-action lawsuits) to remedy any disputes they have with banks or credit card companies.
This is problematic on many fronts. First, call me old fashioned, but I still believe adults are perfectly well-equipped to enter contracts with one another without the government deciding the terms aren’t good enough for one party or the other.
Secondly, the CFPB’s own 2015 study found that arbitration is actually beneficial to consumers. The agency’s “own findings show that arbitration is relatively fair and successful at resolving a range of disputes … and that regulatory efforts to limit the use of arbitration will likely leave consumers worse off,” comment Jason Johnson of the University of Virginia Law School and Todd Zywicki of the Scalia Law School in a recent study about the CFPB.
This matches the research on the topic, which has shown arbitration “more often compensates consumers for damages faster and grants them larger awards than do class action lawsuits,” in the words of John Berlau of the Competitive Enterprise Institute.
Third, the regulation would dramatically increase the obstacles that new fin-tech startups face, many of which, ironically, offer great promise to improving financial options for low-income individuals. For example, peer-to-peer lending startups could be killed before ever taking off from the new legal liability they will face.
If this were just another case of liberals harming the poor people they are purporting to help, even with President Trump in the White House and Republicans in charge of the House and the Senate, it would be bad enough.
However, it actually represents a much deeper threat to the constitutional order because it would be a huge power grab by the CFPB and, if left unchecked in the Trump era, an extremely dangerous precedent.
At the heart of the “checks and balances” between the three branches of government laid out in the Constitution is the idea that the Congress writes the law and the executive branch enforces it.
Yet here is the CFPB, deeming itself to hold the power to write for itself a new law prohibiting consumers from entering into arbitration clauses with financial companies.
Under the Congressional Review Act, Congress can vote on a (filibuster-proof) resolution to rescind the CFPB rule, killing the entire effort with a bare majority. Given that Warren set the CFPB to be virtually impervious to Congressional oversight with its budget provided by the Federal Reserve as opposed to the regular appropriations process, using the Act is one of the few tools legislators have to stop Warren’s extra-constitutional baby from running amok.
Given the damage to consumer choices on how to address problems with their financial institutions inherent in the CFPB arbitration killing regulation, Congress must act quickly to roll it back. And the added benefit is that the debate over the regulation will remind the Senate why the House-passed bill by House Financial Services Chairman Jeb Hensarling (R-Texas) which dramatically reforms the CFPB is a must-pass bill for this Congress.
It is time for Congress to protect consumers from the arbitration rule overreach and pass Congressional Review Act language rescinding it, before it slips through the cracks and denies consumers their rights to choose how to redress grievances they have with the financial services community.
Rick Manning is president of Americans for Limited Government and served as the public affairs chief of staff at the U.S. Department of Labor during the George W. Bush administration.
