Banks have a challenge when Congress returns from summer recess next week. His name is John Neely Kennedy.
The freshman Republican senator from Louisiana is one of a handful of lawmakers who could squash the finance industry’s dream of tweaking a key Consumer Financial Protection Bureau regulation. So far, he’s not saying whether he will or won’t.
The new rule would make it easier for customers to sue financial institutions, and banks have spent millions to keep arbitration as the required venue for dispute resolution instead. Lawmakers have a limited window of time to change the provision, and because the GOP’s Senate majority is slim, Kennedy, a lawyer and former Democrat who pitches himself as a folksy Washington outsider, could be the one to cast the deciding vote.
“Senator Kennedy’s vote is very significant,” said Bill Himpler, executive vice president of the American Financial Services Association, which lobbies for consumer-finance companies. “We’re doing everything we can to let Senator Kennedy know how important arbitration is for a lot of companies in the great state of Louisiana.”
Capitol Hill Mystery
Kennedy, 65, is a mystery to many on Capitol Hill. His reluctance to get with the GOP program on the arbitration rule has left a lot of bank lobbyists scratching their heads. He exemplifies the challenges facing the so-called political establishment when it comes to herding a new wave of mavericks in the unpredictable era of President Donald Trump.
The CFPB rule restricts financial firms from forcing consumers to resolve their disputes through closed-door arbitration instead of addressing grievances in open court. Consumer advocates argue that without it, banks can’t be held accountable for cheating customers. Banks hate the rule because it opens them up to costly class-action lawsuits. Republican lawmakers say the CFPB used a flawed method to create the rule.
In their attempts to reverse the rule, Republicans are relying on the Congressional Review Act, which lets lawmakers undo regulations with a simple majority within 60 legislative days of their publication. The House of Representatives has already passed a measure reversing the rule. Senators, led by Banking Committee Chairman Mike Crapo of Idaho, have introduced their own version.
Close Vote
Republicans can only afford to lose two votes from their own party. And it’s going to be close.