CEI Joins Coalition Letter Urging Use of Congressional Review Act to Reverse CFPB Arbitration Rules
Dear Speaker Ryan and Majority Leader McConnell:
We, the following free-market, limited-government, and liberty-oriented organizations, ask you to use the Congressional Review Act to reverse recently published rules promulgated by the Consumer Financial Protection Bureau (CFPB) ending long-held policy allowing for binding arbitration contracts. Failure to reverse this regulation will result in an avalanche of class-action lawsuits that will hurt jobs and do little to benefit consumers.
The CFPB’s arbitration rule has been described as “Christmas in July” for America’s trial lawyers – and rightly so. According to the CFPB’s own finding, the rule will cost consumers billions of dollars and unleash over 6,000 class action lawsuits every five years. This rule is an obstacle to the efforts to right America’s fiscal ship and create jobs and prosperity for the American people.
Class action lawsuits primarily benefit the trial lawyers rather than the plaintiffs they claim to represent. One extreme example regarding the Bank of Boston even resulted in some of the “winning” plaintiffs owing more in legal fees to lawyers, who walked away with millions, than the meager winnings they received. Class-action lawsuits all too often benefit no one but lawyers, and arbitration provides a fair alternative that should not be prohibited by regulatory fiat.
The CFPB’s own report provides undermines the case for relying exclusively on class-action lawsuits. Of the minority of cases filed between 2010 and 2013 that were later settled, consumers received on average only $32, while lawyers received $424 million in total fees. This disparity is due in part to the fact that claims are never filed by the vast majority of those in an eligible class, and lawyers receive fees based on inflated award figures that are never paid out.
There are also significant issues with the structure of the CFPB and its overall lack of accountability to elected officials. A United States Court of Appeals has held that “when measured in terms of unilateral power, the Director of the CFPB is the single most powerful official in the entire U.S. Government, other than the President. Indeed, within his jurisdiction, the Director of the CFPB can be considered even more powerful than the President.”
As a rehearing of this ruling on the CFPB’s constitutionality by the full Circuit is currently underway, and Congress weighs its own various options to rein in the unaccountable agency, CFPB should at the very least be prevented from instituting major new rules that could disrupt large segments of the economy until such issues are resolved. This is a prime opportunity for members of Congress to uphold their oaths to support and defend the Constitution by safeguarding the nation from costly new CFPB regulations.
Andrew F. Quinlan ~ President, Center for Freedom and Prosperity
Grover Norquist ~ President, Americans for Tax Reform
David Williams ~ President, Taxpayers Protection Alliance
Phil Kerpen ~ President, American Commitment
Christine Harbin ~ Vice President of External Affairs, Americans for Prosperity
Andrew Langer ~ President, Institute for Liberty
Daniel Schneider ~ Executive Director, American Conservative Union
Eli Lehrer ~ President, R Street Institute
Iain Murray ~ Vice President for Strategy, Competitive Enterprise Institute
Pete Sepp ~ President, National Taxpayers Union
George Landrith ~ President, Frontiers of Freedom
Gregory T. Angelo ~ President, Log Cabin Republicans
Steve Pociask ~ President, American Consumer Institute
James L. Martin ~ Founder & Chairman, 60 Plus Association
Jason Pye ~ Vice President of Legislative Affairs, FreedomWorks
Seton Motley ~ President, Less Government
Rick Manning ~ President, Americans for Limited Government
Jeffrey Mazzella ~ President, Center for Individual Freedom
Karen Kerrigan ~ President, Small Business & Entrepreneurship Council
Norman Singleton ~ President, Campaign for Liberty
Tom Schatz, President, Council for Citizens Against Government Waste
Charles Sauer ~ President, Market Institute
Katie McAuliffe ~ Executive Director, Digital Liberty
Harry C. Alford ~ President/CEO, National Black Chamber of Commerce
Tom Giovanetti ~ President, Institute for Policy Innovation
Mario H. Lopez ~ President, Hispanic Leadership Fund
Matthew Kandrach ~ President, Consumer Action for a Strong Economy