September 28, 2017

BEND THE KNEE TO THE CFPB: Elizabeth Warren and her ilk are cynically using the Equifax security breach to stop the Senate from disapproving of the CFPB’s arbitration rule, as Reason’s Eric Boehm explains well here. Cui bono?

The CFPB’s arbitration ban doesn’t help consumers and doesn’t help banks, but it would be a major boon to trial lawyers. The arbitration ban is another proxy war in a long-running battle between business groups like the U.S. Chamber of Commerce and trial lawyers, as Politico’s Lorraine Woellert reported last month.

There’s a lot of money at stake. The CFPB study that supposedly justified the new rule shows that class action attorneys made more than $424 million in the three-year period examined in the study. Consumers during that time, if you’ll remember, got settlements averaging $32 apiece.(*)

And let’s not forget where a lot of money trial lawyers rake in from these settlements ends up…

More on the role of trial lawyers in this from my colleague John Berlau, and from Ted Frank, genuine champion of the little guy.

* Edited to add: That $32 per consumer figure actually overstates the benefit to consumers from class actions considerably. The average payout across all class members is actually around $1.45, and that assumes the CFPB’s claim rate of 4% is correct. Other evidence suggests it’s lower than 1%, which means that the average class member receives pennies – or simply a worthless coupon.

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