The financial industry’s hefty investment in the campaigns of House members appeared to pay off this week when that chamber voted to kill a new rule that allows consumers to file class-action lawsuits against banks and other institutions.
The Republican-led House passed a resolution on Tuesday to block a Consumer Financial Protection Bureau (CFPB) rule that was published earlier this month; that rule prohibits financial service companies from inserting agreements in contracts that prevent customers from filing class-action lawsuits against a company.
Those agreements, which have become popular in recent years, instead require consumers to settle complaints through arbitration, a less public and often less costly process favored by financial institutions.
Blocking the rule has been a priority of the financial industry since it was first suggested in the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in response to the 2008 financial meltdown. But killing the rule will also require the Senate to act as the House did.
To fight the CFPB, the financial industry has spent millions cultivating relationships with lawmakers such as Rep. Keith Rothfus, R-Pa., who sponsored the resolution to undo the CFPB arbitration rule.
Since Rothfus was first elected to Congress in 2009, he has received more than $971,000 from financial institutions — $389,990 from securities and investment firms; $316,767 from insurance firms, which sell financial products; and $264,714 from commercial banks, according to the nonpartisan Center for Responsive Politics (CRP). On average, House members receive $163,702 from the financial sector, CRP reported.
Rothfus also enjoys the support of the Club for Growth, the self-described “leading free-enterprise advocacy group in the nation.” The group has given Rothfus $183,428 during his political tenure — more than double the amount from his next highest donor, Federated Investors Inc.
Club for Growth supports a number of financial deregulation initiatives and scores politicians based on their positions on key votes. Rothfus scored an 81 percent last year, ranking him 84th out of the 435 House members.
Six of the resolution’s 33 other co-sponsors are part of what the Center for Public Integrity labeled the “banking caucus,” a group of influential representatives with strong ties to the financial industry. The group includes House Financial Services Chairman Jeb Hensarling, R-Texas; Rep. Blaine Luetkemeyer, R-Mo., and Rep. Ed Royce, R-Calif.
Hensarling’s leadership role has translated into hefty campaign contributions. He has received $4.22 million from the financial industry over the course of his 14-year career in the House. Leutkemeyer and Royce have received $1.69 million and $3.48 million from the industry, respectively, according to CRP data.
To kill the CFPB rule, the House relied on the rarely-used Congressional Review Act (CRA), which allows Congress to undo recently finalized regulations by a simple majority vote. The CRA had only been used once prior to the Trump administration, in 2001 during the Bush administration. The current Congress has used the act to repeal 14 Obama-era regulations.
The CFPB defended the rule after the House vote.
“Our arbitration rule was the result of more than five years of careful research and open deliberation,” CFPB spokesman David Mayorga said in an emailed statement. “We found that blocking group lawsuits makes it nearly impossible for most consumers to get justice and relief for wrongdoing.”
The CFPB rule “makes sure bad actors that harm thousands or millions of consumers can be held accountable,” said Lauren Saunders, associate director at the National Consumer Law Center.