Congress Moves to Overturn Arbitration Rule

July 18, 2017

“The CFPB’s anti-arbitration rule hurts consumers and it’s another example of the problems caused by this rogue and unaccountable agency,” stated Rep. Rothfus upon introduction.  In response, House Financial Services Committee Ranking Member Maxine Waters (D-CA) stated, “The Consumer Bureau’s forced arbitration rule ensures that consumers are not required to sign away their legal rights in order to open a bank account, obtain a credit card, finance a car, or obtain a private student loan. The development of the rule was a methodical, well-thought-out process, in consultation with other federal financial regulators.”

 

Over the past week, Acting OCC Comptroller Keith Noreika and CFPB Director Richard Cordray have sparred over the effect of the rule on safety and soundness and the need for a delay.  The cost of litigation "could adversely affect reserves, capital, liquidity, and reputations of banks and thrifts, particularly community and midsize institutions," cautioned Comptroller Noreika.  Director Cordray responded by saying the OCC had not previously expressed concern about the rule.  Senate Banking Committee Ranking Member Sherrod Brown (D-OH) defended the CFPB in a letter to the Comptroller, stating, “It is disappointing but not altogether surprising that the OCC is trying to manufacture an argument that a vital consumer protection conflicts with the safety and soundness of banks.  The argument that consumer protections will jeopardize the soundness of banks is as specious today as it has been in the past.”

 

On Tuesday, July 18, 2017, the CFPB’s final arbitration rule to ban class action waivers was published in the Federal Register.  The rule is effective 60 days after publication, and prospectively applies to contracts entered into more than 180 days thereafter.  This move also initiates the 60-legislative-day clock for Congressional action on a resolution of disapproval to reject the rule under the authority provided by the Congressional Review Act.  On July 20, 2017, Sen. Mike Crapo (R-ID) and Rep. Keith Rothfus (R-PA) introduced resolutions S.J. Res. 47/ H.J. Res. 111 to repeal the rule. The House is expected to consider H.J. Res. 111 the week of July 24, 2017.