House Votes to Void CFPB’s Recent Arbitration Rule

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By Rob Tricchinelli

The House passed a resolution July 25 that would invalidate a recently adopted Consumer Financial Protection Bureau rule to prohibit financial firms from steering consumers into mandatory arbitration to resolve disputes.

H.J.Res. 111, sponsored by Rep. Keith Rothfus (R-Pa.), passed the chamber in a 231-190 vote. A similar resolution has been introduced in the Senate, where it can be passed under the Congressional Review Act with a mere simple majority if voted on within 60 days of the rule’s official publication—July 19.

All Democrats opposed the resolution, joined by lone Republican, Rep. Walter Jones (N.C.).

The rule would prevent language in consumer agreements that bars class actions. The resolution’s supporters say the arbitration rule would subject consumers to expensive legal fees.

“Americans were promised a Consumer Financial Protection Bureau, but instead they obviously got a trial lawyer enrichment bureau,” House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said on the House floor.

The rule’s supporters contend that forced arbitration clauses are unfair because consumers rarely seek the remedy, allowing banks and payday lenders to charge them illegal fees.

Prognosis

The Trump administration said the president would sign the resolution scotching the rule if it passes both houses. If that happens, the CFPB would be prohibited by the Congressional Review Act from adopting a rule that is “substantially the same.”

The resolution’s chances in the Senate are uncertain, however, given a slim GOP majority and Democratic opposition.

A similar effort to nix a CFPB rule on prepaid cards never received a Senate vote, and Republican leaders there have a full agenda including health care, tax reform, nominations, and government spending.

‘Outrageous and Unacceptable’

Financial trade groups, including the Consumer Bankers Association and Independent Community Bankers of America, criticized the CFPB’s rule and urged lawmakers to overturn it.

The U.S. Chamber of Commerce and Americans for Prosperity, the conservative advocacy group backed by the Koch brothers, both issued a “key vote alert” in favor of the resolution.

Democratic lawmakers have backed the CFPB’s rule. At a July 25 press conference, Rep. Maxine Waters (D-Calif.) called the resolution “another shameful Republican effort to take away consumer protections.”

“This is outrageous and unacceptable,” she said.

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

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