CFPB

Congressional Republicans Say They Will Move To Strike Down CFPB Arbitration Rule

Republican lawmakers have stated their intention to use the Congressional Review Act to overturn the arbitration rule issued by the Consumer Finance Protection Bureau on Monday.  Said rule change would allow consumers to band together to form class action suits by making it illegal for financial service businesses to slip “arbitration clauses” into consumer contracts. Such clauses prevent consumers from forming class action suits — and instead settle disputes between consumers and creditors with an arbitrator (mediator) instead of in court.

The CRA allows Congress to review new federal regulations issued by government agencies and overturn them with a majority vote. The law — though twenty years old — has only been used once before to stop a federal regulation from going into effect. As of this year, however, Congress has used it to overturn 14 Obama-era rules on a variety of topics. The CRA not only stops rules from going into effect, being shot down with the CRA also prevents agencies from issuing “substantially similar” regulations in the future.

The current crusade against the arbitration rule is lead by Senators Tom Cotton of Arkansas and Mike Crapo of Idaho, both of whom referred to the CFPB as a dangerous unaccountable bureaucracy.

The CFPB, for its part, issued the rule to make it easier for consumers to act collectively via the torte system when wronged by a financial services provider. The rule bans most types of mandatory arbitration clauses, which require credit card or bank customers to use a mediator when they have a dispute and which stops class action suits because class action isn’t allowed in arbitration proceedings.

“People who would otherwise have to go it alone or give up will be able to join with others to pursue justice and some remedy for their harm,” the agency said on its website in explaining the rule.

The Senators, however, don’t believe that opening the class action floodgates is the solution.

“Driving dispute resolutions into class actions is probably harmful to consumers rather than helpful to consumers, so I just believe that we need to have a much more effective tool to address concerns that are raised with arbitration,” Crapo said.

If Republicans move forward with repealing the rule, Democrats will likely run on it in 2018.

——————————–

Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The September 2019 AML/KYC Tracker Report provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

Click to comment

TRENDING RIGHT NOW

To Top