In ongoing coverage of the arbitration issue, wherein private companies usurp the role of the judiciary, the companies have won a victory – temporary as it may be – in their war against anything which may give consumers protection against minor corporate fraud. NBC News reports:
The Republican-led Senate narrowly voted Tuesday to repeal a banking rule that would let consumers band together to sue their banks or credit card companies to resolve financial disputes.
Vice President Mike Pence cast the final vote to break a 50-50 tie.
The banking industry lobbied hard to roll back the regulation, which the Consumer Financial Protection Bureau unveiled in July. The rule would ban most types of mandatory arbitration clauses found in the fine print of agreements that consumers enter into when opening checking accounts or getting credit cards.
It appears the Republicans are indulging in bad math:
“The effort to try to characterize this as some devious system that has been created to try to stop consumers from having access to fairness is simply false,” said Sen. Mike Crapo, R-Idaho, chairman of the Banking, Housing and Urban Affairs Committee. “We have a very fair system that has been working for over 100 years in this country.”
Crapo said that the average pay-out for consumers in class-action lawsuits against financial companies was just $32 but that lawyers stood to make millions.
Democrats argued that consumers generally don’t have the time and means to pursue claims in arbitration and that because most disputes revolve around small amounts, they typically just give up. They said banks and other financial firms know that, in the end, they won’t have pay a real price for taking advantage of a consumer.
That’s the key – the Republicans holding a dependent variable constant, when the fact of the matter is that a class action suit is far more likely to be pursued than an arbitration claim. I wonder if the Republicans believe what they say. It’s lose-lose for them, for if they believe that, then we can conclude they, and their staff, don’t know how to think, and if they do understand it, well, they’re four-square on the side of the companies and not for protecting the consumers from the predations of the ethically challenged banks and other interested entities.
That is, they’re abandoning their responsibilities.
In fact, there’s a second issue that both sides are ignoring. Will corporate pay attention if they’re forced into arbitration by, say, 5% of their clients over some minor fraud[1]?
No, corporate won’t give a shit. It’s part of doing business.
But class action suits can exact a real pound of flesh from companies, because that postcard announcing the action arrives in your mail, and I’ll bet more than 50% of those eligible to join the class will actually do so, more if the lawyers are smart enough not to write the note in legalese, but instead in emotionally charged language.
And the kinds of losses that can be exacted in a class action suit are just the kind needed to get corporate’s attention and discourage minor corporate fraud.
Or even major white collar crimes.
It’s not so much the actual punishment as the potential punishment which is important here – and the GOP is completely ignoring it by focusing on the numbers. And it appears the Democrats have let themselves be mislead, although I don’t know that NBC has given us the complete story here.
So I’m seeing the C-suite denizens waiting at their telephones for their lobbyists to report victory when Trump signs the bill, then turning to authorize the first scalping of their victims clients.
I wonder if my bank – one of the smallest in the state, I should imagine – well, no, not according to this list, I guess having a grand total of two branches is a poor way to estimate – is involved in this mess. I wonder if they’d tell me if I called and asked.
1For corporate fraud, 5% seems a likely number, although I’m really just hand-waving here.
