The U.S. Chamber of Commerce made its case this morning to several reporters against House Democrats' bill to re-vamp federal regulation of the financial industry. The bill, HR 3126, would establish a new regulatory agency, the Consumer Financial Protection Agency, which would consolidate some regulatory functions while splitting others apart — it's the financial equivalent of the Department of Homeland Security.
The bill is very complicated and contains many moving parts. Some of the Chamber's opposition is broadly based on the problems it could create in the credit market. Some opposition is based on more parochial concerns by various industries — for example, the bill could lay specific new burdens on home inspectors and others involved in the real estate transaction process.
But one important aspect of the bill is that it contains two provisions that trial lawyers savor, and which they have spent a decade lobbying for, at least.
First, the bill effectively allows the federal government to deputize state attorneys general to sue companies in certain consumer protection enforcement actions. That might not sound like a boon for the trial bar, but consider this: The federal government is currently barred from contracting private plaintiffs' lawyers. State attorneys general, on the other hand, are accustomed to hiring them, as in the famed tobacco settlement, which literally netted billions of dollars for a fortunate handful of trial attorneys. That means that HR 3126 stands to create lots of new business for the trial bar. (Experience has shown that this business also tends to go to the politically well-connected.)
Second, the bill contains a provision long-sought by the trial lawyers' largest lobbying group, the American Association for Justice (formerly known as ATLA). It allows the new agency to regulate tightly or even ban binding arbitration agreements — the kind that many credit card companies require you to sign as a condition of membership. This is a handout for plaintiffs' lawyers, designed to generate more lawsuits in place of dispute arbitration. That's why AAJ lists the issue prominently in its lobbying disclosure reports. In fact, a ban on binding arbitration was a major goal for them even as early as 1999, the records show, when the group was pushing the Year 2000 Consumer Protection Plan Act.
AAJ has spent $47.3 million lobbying Congress since 1999, $13.4 million of it since Democrats took over the House and Senate in January 2007.