Null and void.
The Consumer Financial Protection Bureau (CFPB)’s much debated, loved and hated arbitration rule has been officially killed through the rule’s being struck from the Federal Register. Thus, it’s current status: Nullification.
As reported in several places, including CU Insight, the nullification ruling comes in the wake of President Donald Trump’s signing of a joint resolution against the rule earlier in November. The final arbitration rule would have prohibited clauses preventing consumers from joining class action litigation tied to credit cards and other financial services products.
The U.S. House of Representatives passed its own resolution against the arbitration rule in July, and the Senate voted similarly in October.
Earlier in the month, the resolution was passed under the Congressional Review Act (CRA). Through that conduit, regulators are prevented from enacting similar rules down the line. As such, the “mandatory arbitration clauses” will be a fixture in financial services and beyond.
According to news from Reuters, the CFPB rule was set to go into effect next spring, giving bank customers the option to file class-action lawsuits to lower their legal costs, and barred banks, credit card issuers and other financial companies from requiring customers to sign away their rights to join group lawsuits and agree to take potential disputes to closed-door arbitration as a condition of opening accounts.
While Republicans argued that class action suits only benefit attorneys and that arbitration is faster and leads to larger awards, Democrats believed that arbitration is rigged against customers and that the Constitution guarantees a right to a trial.
Although CFPB Director Richard Cordray, a Democrat appointed by former President Barack Obama, directly asked the president to veto the resolution, Trump signed it. The move could protect a company’s ability to block customers from suing in a variety of non-financial services. Education Secretary Betsy DeVos is even working to keep the clauses in contracts related to higher education.