A Big Win for Wall Street Demonstrates How Trump Puts Big Business First

(TFC) – The Senate voted on a piece of legislation last week, a decision that could have potentially seismic repercussions for consumers. The exact implications of the bill are not apparent, but it appears to impact how workers and consumers can interact with the broader business structure. Specifically, the legislation will control for how disputes between the consumer and the business are conducted.

The Bill

One of the central pillars of the bill is a provision barring the possibility of class-action lawsuits by credit card holders against the companies. The current law — which is further enshrined in this legislation — provides for a third-party arbitration process. An unrelated party will weigh in on any potential disputes, which are held singularly between the company and the individual. Again, the legislation which passed through both the House and Senate will keep and strengthen this status quo.

Many on Wall Street felt this step was necessary, given recent attempts at regulations which would allow consumers to opt out of the arbitration agreements and potentially sign on to massive class-action and individual lawsuits. This integral legislation was spearheaded and implemented by the Consumer Financial Protection Bureau (CFPB) and is slated for dissolution shortly.

The final step in the process is a presidential signature, which is expected to follow in short order.

The CFPB

The organization was initially established to protect consumers from the harmful effects of Wall Street following the 2006 market collapse. The collapse, which crippled the US economy for nearly a decade, was widely brought on by unregulated and risky business practices targeting the housing market.

The CFPB is considered as one of the balancing forces against big business deregulation — the 2014 Supreme Court Corporate Personhood decision, for example.

Today, it continues to act as a sentinel for consumers, and routinely implements regulations targeting specific aspects of Wall Street big business deemed harmful to the average citizen. Its support of class action lawsuits has been a point of contention between the organizations Obama-era leadership and the newly-established Trump administration.

On the Left

Proponents of the CFPB and its class action preferences claim that it allows consumers to seek justice and fair compensation for harm in a timely and efficient manner. The average consumer does not have the time or resources for lengthy and costly court action or arbitration procedures, and may not receive any compensation in the aftermath, supporters argue.

“The repeal of the banking rule that allowed consumers to band together in class action lawsuits will essentially force individuals to either abandon their complaint or continue alone. With the results of now-mandatory arbitration cases not publicly disclosed, this change could also allow companies to avoid reform and continue potentially harmful practices.” 

-Nick Johns, Technology & Digital Safety Investigator at Consumer Safety.org

Class action lawsuits have the potential for high profile coverage that would not be present during arbitration procedures. This symbolic aspect has been a huge rallying point for the CFPB: underhanded business dealings easily fly under the radar during clean and quiet arbitration procedures.

By bringing attention to these practices, the CFPB claims class action is paving the way for future regulatory legislation and Wall Street transparency. A class action victory, then, has the dual purpose of costing a business potentially millions of dollars as well as a PR disaster.

While the sum each claimant receives might not drastically differ from a substantial arbitration settlement, even a failed class action lawsuit can bring public attention to troublesome or potentially harmful business practices. Further, there is a greater sense of solidarity and organization between a mob of claimants than each case judged individually.

In Favor of the Legislation

On the other hand, proponents of the October 24 legislation maintain the importance of traditional low-cost arbitration actions. The US Treasury Department openly criticized the CFPB for its attacks on the established procedures through which business and individual plaintiffs can seek agreements and compensation.

Republican senators — who widely voted for the legislation — simultaneously applauded the victory and wagged fingers at the CFPB. Senator Mike Crapo headed the attacks, opening his speech with a broadside on the organization. “Mr. President, I rise today to discuss the flawed and harmful CFPB arbitration rule and urge my colleagues to support the resolution to disapprove it” (bankingsenate.gov).

The Aftermath

It is unclear that anything will immediately change following this legislation. If anything, the current order of operations will continue, unhindered by the CFPB. Many consumers fear that the new law goes beyond the direct changes it will implement, however, and set a dangerous precedent for Wall Street protectionism.

If the House and Senate continue to crystallize the current procedures for interactions between big business and the consumer, the possibility of business scams and other undesirable side-effects of uncontrolled trade grows accordingly. The fear, then, is not that the legislation will directly harm consumers, but that it will open up the door for big business to take advantage of those in vulnerable positions.

Image Source: Terrapin Flyer, Flickr, Creative Commons
wall street

The Trump administration, which ran on a platform of economic protectionism and free market buildup, may press this advantage for further deregulation in the future. Only time will tell.