On Monday, July 10, the Consumer Financial Protection Bureau announced its new rule preventing banks and credit card companies from using mandatory arbitration clauses in new customer accounts.
On Tuesday, July 11, and as predicted on “CPR Speaks,” Congress moved to stop the CFPB final rule. Arkansas Republican Sen. Tom Cotton announced he was drafting a resolution to get the new CFPB rule rescinded using the Congressional Review Act. Pennsylvania Republican Sen. Pat Toomey, Chair of the Subcommittee on Financial Institutions and Consumer Protection, is reported to be considering a similar step.
The newly popular 1996 Congressional Review Act—see the “CPR Speaks” link above–provides expedited procedures through which the Senate may overrule regulations issued by federal agencies by enacting a joint resolution.
Characterizing the CFPB as having gone “rogue,” and its new rule as an “anti-business regulation,” Cotton is stressing the benefits of arbitration, as well as consumers’ capacity to make business decisions.
Financial Services Committee Chairman Jeb Hensarling, R., Texas, is also publicly criticizing the rule as bureaucratic and beneficial only to class action trial attorneys. He is urging Congress to work with President Trump to reform the CFPB and excessive administration by government. As also mentioned in yesterday’s post, in April Hensarling proposed H.R. 10, the Financial CHOICE Act of 2017, which would repeal the CFPB’s authority to restrict arbitration. The bill has been referred to the Senate Committee on Banking, Housing, and Urban Affairs.
It remains to be seen whether the CFPB’s new rule will survive these and other potential congressional and court challenges. Much will depend upon the Senate and how many Republicans switch sides on this issue. Please stay tuned to this space for important developments.