U.S. Consumer Bureau Loses Fight to Allow More Class-Action Suits
It is entirely superficial to cast this fight as one between good and evil. As much as anything, it was about proper process.<p>Legislative, executive, judicial - those are the three branches under the Constitution that are supposed to check and balance one another.<p>The legislature passed the federal arbitration act almost 100 years ago. It was signed into law by the president. And it has been consistently upheld by the U.S. Supreme Court in the face of many and varied court challenges.<p>In essence, the result of this century-old jostling is a body of duly enacted law that says that binding arbitration clauses are truly binding and therefore can be used in contracts to foreclose judicial proceedings by requiring that disputes covered by such clauses be resolved through arbitration. Moreover, a massive court challenge resulted in a holding of the Supreme Court saying that waivers of judicial class-action rights in favor of arbitration are also binding - meaning, it is neither unjust, unfair, nor against public policy (legally speaking) to say that consumers can be required to waive such rights and be required in all cases to arbitrate their disputes.<p>Now, one may believe that all of this is repugnant and grossly harmful to consumers. Others may disagree and may in particular believe that class-action lawsuits are primarily vehicles that help the trial bar and do little with their nickel-discount coupons to actually further the interests of consumers. Either way, the existing law is the existing law. The proper way to change it is to gain control of the legislative and executive branches and to repeal or amend the federal arbitration act. In that way, the law could easily and properly be shaped to forbid making arbitration mandatory and binding or limit the ability to use binding clauses in specific areas of law, etc.<p>The problem with CFPB is that it sought to carve out its own view of what is right and proper for consumers of financial services without regard to the intent of Congress in having enacted the existing arbitration laws. As established, CFPB is not accountable to Congress or any other form of traditional oversight of its bureaucratic functions (its structure was declared unconstitutional by the D.C. court of appeals). It is in that sense an organization that could be characterized as &quot;rogue&quot; based on traditional rules of governance and it is certainly seen as such by those who disagree with its particular actions in using its power to attempt to regulate arbitration clauses, payday loans, etc.<p>So CFPB essentially stuck its thumb in the eye of Congress in pushing forward with these measures.<p>Now Congress has struck back, saying, in effect (with its authority under the Congressional Review Act), &quot;we don&#x27;t like what this regulation does and this is our domain - therefore, we rescind it.&quot;<p>So, while one can try to say this is good versus evil, it is basically the legislature asserting itself on a matter of policy against a bureaucrat who it believes overstepped his proper role.<p>The result is to keep the status quo, nothing more. The rules in effect as a result of this action by Congress are the same ones that have governed arbitration clauses in every walk of life in American business for nearly a century.<p>For those who don&#x27;t like it, that is fine. The ballot box is open as the prescribed means to effect a change. All this recent action amounts to is a declaration by Congress saying that this should not happen by bureaucratic edict. That may be bad policy, or it may be good policy, but it does uphold the rules of law favoring the electorally-accountable legislative branch over the authority of an unaccountable bureau chief.