University of Illinois law professor Bob Lawless was all set to deliver a statement before the Senate Judiciary Committee on an important topic yesterday -- how the Supreme Court's decisions on cases affecting the the financial services industry revoke state protections against deceptive lending practices. The deregulation of the credit card industry is a prime example:
The Supreme Court ruled in 1978 that banks could charge the maximum interest rate determined by state legislatures in the banks’ home states, not the interest rate of the states in which they do business. Unsurprisingly, credit card businesses moved to Delaware and South Dakota—two states with virtually no interest caps—thus rendering state usury laws worthless.
Twelve years ago, the court applied the same logic to the size of fees a bank can charge. Congress has refused to step in at the federal level, enabling the industry’s thorough deregulation.
With the freedom to act on their own accord, banks have implemented an array of confusing and punitive measures that bilk cash from clients.
But just as Lawless began his remarks, Sen. Sheldon Whitehouse (D-RI) was forced to shut down the hearing after an unnamed Republican senator invoked Senate Rule XXVI, a rarely-enforced procedural requirement that all hearings come to a close within two hours of the Senate convening for the day.
What was there to hide? On the blog Credit Slips, Lawless recounts what was discussed before the hearing was gaveled. It's testimony that would send shivers down the spine of any politician beholden to the financial services industry.
We heard heart-breaking testimony from Bridget Robb, a 34-year old mother who nearly died in front of her 6-year old daughter while receiving repeated electric shocks because of an electronic lead in a pacemaker the manufacturer knew to be defective but for which had given no notice. Because of a U.S. Supreme Court decision protecting medical device manufacturers, Ms. Robb has been stripped of the right to sue for damages because of the harm she has received. We also heard from Maureen Kurtek, a 44-year old mother whose insurer denied her coverage for necessary medical treatment although it knew her previous insurer had authorized the same coverage on three previous occasions. As a result of not receiving a needed, Ms. Kurtek nearly died, had half of her right foot amputated, lost five fingertips, and suffers from numerous painful conditions. Again, Supreme Court decisions strip Ms. Kurtek of the right to sue. Professor Tom McGarrity was there from the University of Texas to provide expert commentary on how the Supreme Court's preemption decisions led to these results. I was there to discuss how the same trends toward centralized federal regulation in the financial services area similarly deprived consumers of important protections.
As Mary Kane writes at The Washington Independent, there's one solution to this sort of congressional spinelessness: "Maybe next up for the Committee should be considering how to keep Republican partisans from abusing Senate procedural rules to protect their own agendas."
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