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Ian Millhiser

Ian Millhiser

Posted: February 17, 2009 10:10 AM

It's Not Just EFCA: Banks Spend TARP Funds on Anti-Consumer Lobbying


As the Huffington Post's Sam Stein recently reported, three days after Bank of America accepted $25 billion in TARP funds, it hosted a conference call with movement conservatives and business heavyweights in order to organize opposition to a piece of pro-union legislation. But Bank of America's anti-worker crusade is only the tip of a much larger iceberg. As a recent report at Overruled reveals, the banking industry has continued a massive anti-consumer lobbying campaign, even as it took hundreds of billions of dollars in TARP funds to stave off insolvency.

TARP was enacted to ensure that credit markets would continue to operate and to prevent the collapse of America's financial industry. The industry, however, has chosen instead to spend a portion of its funds lobbying Congress on bills that would curb some of the banking industry's worst excesses. Among the bills which the banking industry lobbied on after it began receiving TARP funds are bills to prohibit abusive arbitration practices, such as the Arbitration Fairness Act, the Fairness in Nursing Home Arbitration Act and the Fair Contracts for Growers Act; bills to help foreclosure victims and prevent irresponsible mortgage lending, such as the Mortgage Reform and Anti-Predatory Lending Act and the Helping Families Save Their Homes in Bankruptcy Act; bills to prevent the exploitation of credit card holders, such as the Credit Card Holders Bill of Rights and the Stop Unfair Practices in Credit Cards Act, and even bills to hold TARP recipients accountable for how they spend taxpayer funds, such as the TARP Reform and Accountability Act.

The banking industry's anti-consumer lobbying campaign also highlights the importance of one issue in particular, binding mandatory arbitration. As I have blogged about in the past, one of the credit card industry's most abusive practices is the use of binding mandatory arbitration clauses, which force credit card holders to sign away their right to hold the bank accountable in court if it breaks the law---and instead shunts the cardholder into a biased, privatized forum. Credit card companies increasingly refuse to issue credit cards unless the cardholder signs an arbitration agreement, and when the cardholder does sign this agreement, they effectively give the company carte blanche to violate any laws it chooses. As one study of almost 20,000 arbitration decisions found, the corporate party prevails a massive 94% of the time in suits between a credit card company or debt collector and an individual cardholder. We now know that the banking industry has aggressively lobbied to continue this abusive practice even as they were relying on government handouts to avoid bankruptcy.

The full report on the banking industry's post-TARP lobbying activities can be read here.