President Trump is in the process of all but shutting down the Consumer Financial Protection Bureau. He has even dropped several cases filed by the CFPB under former President Joe Biden’s watch. The agency aims to protect consumers from fraudulent practices in the financial industry.
Many are asking: If the CFPB goes out of business, who will be there to help consumers? The answer is one million lawyers. CFPB has been around for less than 15 years. Consumers were not helpless before then. We do not need more government agencies to police the marketplace — we have the plaintiffs’ bar.
I realize plaintiffs’ attorneys gets a bad rap in many circles. But the truth is, we need someone to police the marketplace. Private lawyers are a much better option than yet another government agency.
Take a look at one of the headline cases that Trump dropped: an action against Capital One for allegedly engaging in billions of dollars of tricky practices with its high-yield savings accounts.
The CFPB filed its case only days before Trump took office. But the private bar sued Capital One for the same thing almost two years ago. Seven different class actions against it are currently consolidated in a federal court in Virginia. The CFPB’s lawsuit was just a me-too lawsuit. Capital One is not off the hook without it.
Indeed, consumers are in better hands now. The data show that when private lawyers and the government pursue the same wrongdoers, the private bar gets more. This is about simple incentives: plaintiffs’ lawyers work on contingency and only get paid if they win. Government bureaucrats get paid no matter what they do.
Private lawyers also do not get captured by politics and special interests the way the government does. Yes, most plaintiffs’ lawyers are Democrats, but the profit motive keeps them pure. They will sue whoever is liable. They don’t look the other way because of campaign contributions or the revolving door between industry and government. These are the exact same reasons the private sector tends to do a better job at most things than the public sector does.
Far from a shortcoming, relying on the private bar to police the marketplace is one of the secrets to our success in America. In Europe and other advanced economies, you have to get permission from the government before you do things. In America, we mostly let you do what you want to do, then sue you later if you mess up. We ask for forgiveness, not permission. Our approach has led to a more nimble, innovative, and, ultimately, wealthier economy.
It is true that private lawyers sometimes go too far. Nothing is perfect and there are ways to tighten up our system. It is also true that private lawyers can’t do everything. If the remedy needed is not pecuniary, or the pecuniary remedy is small and can’t be bundled into something like a class action, it will be hard to find a private lawyer to represent you. Maybe we need the government to step in some such cases.
But the good news is we already have plenty of government — 50 state attorneys general, ready, willing, and able to go after these bad guys. We don’t need a CFPB in addition to that.
Brian Fitzpatrick is the Milton R. Underwood Chair in Free Enterprise and Professor of Law at Vanderbilt Law School. He is the author of “The Conservative Case for Class Actions” (University of Chicago Press, 2019). He was a law clerk to the late Supreme Court Justice Antonin Scalia and a special counsel to Sen. John Cornyn (R-Texas).
