Members of the House and Senate today introduced legislation that would block the Consumer Financial Protection Bureau’s controversial arbitration final rule from taking effect. The action is permitted under the Congressional Review Act, which gives Congress the ability to reject new federal regulations within 60 legislative days of publication in the Federal Register.
Leading the effort were Senate Banking Committee Chairman Mike Crapo (R-Idaho), House Financial Services Committee Chairman Jeb Hensarling (R-Texas), Rep. Keith Rothfus (R-Pa.), and other members of the House Financial Services and Senate Banking Committees.
The CFPB’s final arbitration rule prohibits customers from waiving their ability to participate in class action suits and limits drastically the use of mandatory arbitration agreements for financial products and services. With such restrictions in place, arbitration is likely to disappear in financial services contracts, and could result in burdens on customers whose claims cannot be resolved through class actions, instead requiring them to go to court for minor, non-systemic disputes.
The American Bankers Association and the state bankers associations have been vocal in their opposition to the rule, and ABA President and CEO Rob Nichols today applauded lawmakers for taking the next step to block it from taking effect. He noted in moving forward with the “misguided” rule, the CFPB undermined its own data, which showed that customers fare far better in arbitration than in class action lawsuits.
“In reality, the vast majority of disputes get resolved quickly and amicably without the need for arbitration or legal action,” Nichols said. “If arbitration disappears, the bureau will force consumers to navigate an already overcrowded legal system where the only winners will be trial lawyers. We think our customers deserve better, and we urge lawmakers in both chambers of Congress to overturn this anti-consumer rule as soon as possible.”