By: The Editorial Board
Amid Republican disagreements over health and tax reform, 50 GOP Senators united Tuesday to overturn the Consumer Financial Protection Bureau’s arbitration rule. This is a victory for the economy and Mitch McConnell’s leadership.
CFPB director Richard Cordray gambled that Republicans were too timid and divided to rescind his expansive rule that banned arbitration agreements with class-action waivers in financial service contracts. The rule would have set off a trial-lawyer race to the courthouse.
A Treasury report Monday detailed how the rule violated Congress’s directive to the CFPB in Dodd-Frank to examine whether limiting or banning arbitration would protect consumers and benefit society. Mr. Cordray’s rule did neither. According to the CFPB’s own data, more than $330 million in wealth would have been transferred from businesses to trial lawyers. Businesses would have paid some $2.2 billion more on attorney fees and settlements.
Most consumers would have been worse off since arbitration provides an expeditious and inexpensive way to resolve disputes. The CFPB’s own study found that consumers on average received $32 from class-action payouts versus $5,389 from arbitration awards. The Comptroller of the Currency said the rule would have increased the cost of credit.
Vice President Mike Pence cast the 51st vote for the Congressional Review Act resolution since Louisiana Senator John Kennedy and South Carolina’s Lindsey Graham sided with the tort bar. Mr. McConnell deserves credit for preventing other defections after Elizabeth Warren portrayed the resolution that passed the House in July as “a giant wet kiss to Wall Street.”
Democrats like Heidi Heitkamp (N.D.) and Joe Donnelly (Ind.) ought to be held to account in next year’s midterms for supporting trial lawyers over consumers. Mr. Cordray has been mulling a bid for Ohio Governor, and the rebuke won’t be a winning platform. Maybe he should step down before he gets handed more defeats by Congress or the courts.