Senate Republicans Plan to Sneakily Gut Major Consumer Protection Rule

In the middle of a consequential week for the future of American health care, Senate Republicans are hoping to sneak through a controversial nullification of a key rule from the Consumer Financial Protection Bureau.

Republican leaders are whipping to secure the votes to overturn a rule CFPB finalized in July, which would protect financial companies from class-action lawsuits and deny consumers a day in court. The rule is among the most consequential actions the CFPB has taken since its founding.

An added wrinkle here: Executives for both Wells Fargo and Equifax, both accused of ripping off millions of consumers, will testify in Senate committees next week. Both companies have used arbitration clauses in an attempt to deny consumers access to the courts. By getting the arbitration vote out of the way before the hearings, Republicans can avoid having to hand a gift to financial companies while Wells Fargo and Equifax sit squarely in the public spotlight. With Obamacare repeal sucking up all the oxygen, this week offers a perfect cover.

“This rush toward a vote in the Senate is a cynical attempt to roll back an important consumer protection before anyone gets straight answers from Equifax and Wells Fargo about the damage they’ve done to the financial lives of millions of Americans,” said Lisa Donner, executive director of Americans for Financial Reform.

Senate Majority Leader Mitch McConnell, R-Ky., recently told financial industry lobbyists at a dinner in Washington that he planned to bring the bill to the floor as soon as he had the votes, according to a Republican at the dinner.

The CFPB’s rule bars consumer financial contracts from including clauses that force disputes into an arbitration proceeding, instead of allowing customers to join together with others in a class-action lawsuit. Critics say this gives financial institutions a license to rip people off, confident that only a maniac would go through years of costly arbitration to recover an erroneous $30 charge. “That is exactly what the banks are counting on. … They can get away with nickel and diming you forever,” said Sen. Elizabeth Warren, D-Mass., in a Senate floor speech Monday night.

Rumors are bouncing among Democrats in the Senate and on K Street that McConnell could bring it to the floor for a vote as early as Tuesday. But with Alabama Sen. Luther Strange out campaigning, that makes a Tuesday vote highly unlikely. Don Stewart, a spokesperson for McConnell, noted that a vote is not yet on the schedule.

Later in the week, however, could be more likely, particularly if Strange loses his primary, which would give McConnell his second major loss in two days. At that point, a win on the arbitration rule looks awfully enticing.

The bigger problem for McConnell, though, is that even with Strange back, he may still not have the votes. Sen. Lindsey Graham, R-S.C., opposes the move — ironic given that his own health care repeal bill, Graham-Cassidy, has provided the cover for McConnell to move quietly on the arbitration rule.  

That only leaves McConnell able to lose one more GOP vote, and a significant number of Republicans are on the fence, notably Sen. John Kennedy, a Republican from Louisiana, who was the state’s attorney general and has the strong backing of trial lawyers there. He told The Intercept on Monday evening that he had yet to make a decision.

Susan Collins, a Maine Republican, put the final stake through the heart of Obamacare repeal on Monday evening and is a target of advocates hoping to save the rule. She, too, is undecided. “I have not decided,” she told The Intercept on Monday night. Then, appearing to think back to her weeklong refusal to say how she would vote on Graham-Cassidy, while having effectively made up her mind to oppose it, she added, “I really have not, I’ve been so busy with this.”

Sens. Lisa Murkowski, R-Alaska, and Rob Portman, R-Ohio, haven’t committed publicly either, making a snap vote a gamble for McConnell.

Class-action lawsuits provide incentives for banks to play fair, as the risk of a large payout to millions of customers for systemic violations looms as a penalty. Without that fear, banks and other financial players are free to screw over customers for small amounts many times over, knowing they can get away with it.

CFPB passed the “arbitration rule” preventing the class-action ban in July; it’s scheduled to take effect next March. But under a 1996 law called the Congressional Review Act, Congress can by resolution reject any federal agency regulation within 60 legislative days of it being finalized. This type of resolution only needs a majority vote in the Senate, with limited debate and no possibility of a filibuster. Under President Donald Trump, Congress has used this process 14 times to take out rules finalized in the final days of the Obama administration.

The House has already passed a resolution killing the CFPB rule; the Senate has until roughly October to follow suit. Rolling back the rule is unpopular — two-thirds of voters support it, according to one survey. But with the spotlight elsewhere, the GOP leadership may sense an opportunity.

If Republicans thought they could get away with a quick-strike vote under cover of the Graham-Cassidy brouhaha, advocacy groups and key senators signaled they wouldn’t allow it. “Republicans want to take away your legal rights to hold companies like Wells Fargo and Equifax accountable. I know it sounds nuts, but it’s true,” Warren said Monday night.

There’s no timetable to bring up the arbitration vote, but Democratic aides said Republicans were attempting to get it done this week. The health care bill repealing the Affordable Care Act must take place this week as well, in order to use majority-vote reconciliation instructions that expire on Saturday.

Public Citizen notes that corporations opposing the rule have spent over $1 billion urging Republicans to pass Congressional Review Act resolutions. The 24 Senate co-sponsors of the arbitration rule resolution have received $100 million from the financial services industry over their careers.

“This isn’t about promoting a conservative agenda, it’s about advancing a donor’s agenda, a big-money agenda,” said Warren Monday, urging C-SPAN viewers to call their senators and ask them to vote no. “Anyone who votes to reverse this rule are saying loud and clear that they side with the banks instead of their constituents.”

Top photo: U.S. Senate Majority Leader Mitch McConnell and fellow Republican senators.