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 CFPB 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.
Senator Lindsey Graham of South Carolina has already said he doesn’t support overturning the regulation. And it’s not clear whether Arizona’s John McCain will be healthy enough to cast a vote as he undergoes treatment for brain cancer. Senators Lisa Murkowski of Alaska and Maine’s Susan Collins are two Republicans who’ve expressed indecision.
That leaves Kennedy, the only Republican on the Senate Banking Committee who hasn’t signed on to the legislation that would kill the CFPB rule or confirmed which way he’s going to vote.
“I haven’t spent any time on it yet, I haven’t really been briefed yet,” Kennedy said in a July 24 interview. A spokeswoman said Tuesday that Kennedy was still mulling it over.
Duck Hunter
A duck-hunting enthusiast and a founder of the North Cross United Methodist Church near New Orleans, Kennedy previously ran for the U.S. Senate twice — once as a Democrat. He switched to the GOP a decade ago. The former law professor served five terms as state treasurer.
Trump campaigned for Kennedy, helping him win a runoff election last year. Kennedy pitched himself to voters as a straight-talker with small-government principles.
“I believe in God, I believe in protecting the unborn, I believe in more freedom, not more free stuff,” Kennedy said in a campaign ad. “I believe that love is the answer, but you ought to own a handgun just in case.”
Since arriving in Washington, Kennedy has stood out for his curious lines of questioning. Once, during a hearing in which Secretary of Education Betsy DeVos testified, Kennedy suggested parents should have as many options on where to send their children to school as they have when they buy mayonnaise at the grocery store. He was criticized by other lawmakers for comparing a serious issue to a condiment.
Lining Pockets
Kennedy’s unpredictability is an issue just as the lobbying push on bank arbitration is ramping up.
On one side, bank advocates and Republican Capitol Hill staffers say that allowing lawsuits would line lawyers’ pockets without providing much relief to consumers.
On the other, Democrats and consumer advocates argue that reversing the rule is a gift to Wall Street, and use the recent sales scandals at Wells Fargo & Co. as an example of why the rule is needed. They say arbitration especially hurts veterans and active military, key constituencies for many GOP lawmakers.
In the middle is Kennedy. Banks question whether his neutrality on the CFPB rule has anything to do with to his ties to attorneys. Kennedy is a former partner at the New Orleans-based law firm Chaffe McCall and sits on the Senate Judiciary Committee.
Kennedy’s reluctance to choose a side may be an indication he’s not as much of a political novice as Wall Street might think. After all, a lot of people who didn’t know his name now do.
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