WASHINGTON ― Congressional Republicans want to repeal a new regulatory rule issued by the Consumer Financial Protection Bureau to limit the use of forced arbitration in legal contracts between companies and individuals. But in addition to facing terrible optics in the wake of the corporate scandals involving Equifax and Wells Fargo, the GOP is also facing opposition from some conservative allies.
The American Future Fund, a conservative dark money group that spent big in the 2012 election, released poll results on Sept. 7 that showed residents of Alaska, Louisiana, Maine and Ohio strongly supported the new rule.
Those states are important because they each have a Republican senator who is still undecided on whether or not to support the bill to repeal the rule. The bill, which has already passed the House, would fail if three Republicans oppose it.
The senators currently on the fence include Sens. Lisa Murkowski (R-Alaska), John Kennedy (R-La.), Susan Collins (R-Maine) and Rob Portman (R-Ohio). Sen. Lindsey Graham (R-S.C.) has already stated his opposition to the bill.
That means that only two of the four Republican holdouts need to vote no to kill the repeal push.
“The Senator is still reviewing,” Meredith Jones, Kennedy’s press secretary, said in an email.
“Rob will thoroughly review the text of the rule in advance of any vote,” Emily Benavides, a spokeswoman for Portman, said in an email.
Spokespeople for Murkowski and Collins did not respond to a request for comment.
“I don’t think they have the votes to kill the rule anymore in the wake of Equifax,” said Dean Clancy, a former vice president at the conservative group FreedomWorks who currently works at the policy consultancy Adams Auld LLC.
Clancy is one of a handful of conservative voices, including the American Future Fund and Tea Party Nation founder Judson Phillips, who oppose congressional Republican efforts to repeal the CFPB rule.
The CFPB rule would ban bank and credit card companies, along with many other financial industry businesses, from pushing customers into arbitration through fine print in a terms of service contract. The biggest supporter of its repeal is the U.S. Chamber of Commerce, the country’s biggest corporate lobby group.
The issue of forced arbitration gained renewed attention last week after the response by Equifax to its revelation that the company was hacked by criminals who stole data on 143 million Americans ― nearly half of all adults in the country.
Initially, the company offered one free year of credit monitoring, but only if users gave up their right to join a class action suit and instead entered into direct arbitration with the company. This kind of forced arbitration heavily favors businesses by pitting a single citizen against the vast power of a large corporation. Arbitration rarely results in victories for the consumer seeking legal redress and often causes the individual bringing suit to lose money.
After a day of negative press over the inclusion of this forced arbitration provision in its terms of service, Equifax changed the language to remove it and other offending clauses.
The use of forced arbitration clauses in the fine print companies make you sign to use their services, whether paid or free, has exploded over the past six years. Their increased use comes as a result of a series of divided Supreme Court decisions handed down by the court’s five-vote conservative majority that has sided with corporations that force arbitration onto consumers.
Equifax isn’t the only corporate scandal to put a spotlight on forced arbitration. A previous investigation by the CFPB revealed that Wells Fargo, one of the three largest banks in the U.S., created millions of fake savings and checking accounts for customers. Customers who had fake accounts made in their names were forced into arbitration because the terms of service banned them from seeking a class action remedy.
Republicans have, up until this point, according to Clancy, viewed the issue of whether or not to repeal the CFPB rule through their opposition to the agency itself. “They see red when they think about the agency,” he said.
The CFPB was created during the Obama administration under the Dodd–Frank Act that followed in the wake of the 2007-08 financial crisis.
But Clancy thinks that the GOP should instead see the rule through a lens of protecting the individual and the right to a jury trial against the power of a big corporation.
“The rule is designed to protect the little guy from big business,” he said.