By: Ridgeway Woulfe
The recession of the Oughts has been, and will continue to be, a generation-defining crisis. For people like me, we had graduations marred by sentiments of caution and warnings of how challenging life was going to be for us in “the real world.” The financial collapse was the result of laissez-faire regulations. My generation needed to endure the collapse and ensure that such disastrous consequences could not happen again.
President Obama was elected, and a number of rules were put in place to help prevent financial policies from causing such destruction. The economy stabilized. Then, President Trump entered office. One-by-one, the federal government has set about removing Obama-era policies, often devoid of explanation or replacement plan.
Recently, Vice President Mike Pence was called in to break a tie in the Senate to remove another Obama-era policy. In a vote which saw two Republicans join the Democratic side of the vote, the Senate and Trump administration nullified a Consumer Financial Protection Bureau rule which helped to protect consumers.
The rule targeted banks’ policies regarding arbitration agreements. Frequently, banks, and other companies, require a number of clauses for a customer to agree to before the customer can receive goods or services. Many of these clauses are too complex for ordinary consumers to even understand what they are agreeing to, and they can be hidden in fine print. One common clause is an arbitration clause. Arbitration clauses often forbid the customer from seeking relief via lawsuits or other methods. Instead, customers can be forced to take any complaints they have to a private arbitrator, where the process follows rules created by the company. Such agreements frequently put consumers at a disadvantage if there is ever a dispute with the company. This model also gives companies less reason to comply with rules and fair practices, as it could cost companies more to comply with fair practices than to go through the arbitration system they created.
Arbitration clauses were the focus of this Obama-era rule. The rule permitted consumers easier access to sue banks, allowing them to avoid such restrictive and advantage-shifting rules. The Trump administration has removed this protection.
Opponents of the repeal view the change as a windfall for the banking industry, allowing them to more easily cheat consumers. Supporters state repealing the rule was the only option to allow for less costly procedures, taking a burden off the industry.
For a person whose existence was fundamentally changed by the Great Recession, seeing a corrective action removed without any form of replacement is frightening. Independently, removing this rule does not bring about another economic collapse. But this action is not independent. The Trump administration is tearing down protections left and right, while showing little to no concern for those now left unprotected. Since the recession was not a result of anyone’s direct intentions, but rather a result of systematic freedom, these actions feel an awful lot like being assured that Lucy isn’t going to lift the football again.