February 25, 2020

February 24, 2020

Subscribe to Latest Legal News and Analysis

Senate Joins House in Resolution Overturning CFPB Arbitration Rule; President Trump is Likely to Sign

After weeks of speculation, the U.S. Senate voted on Tuesday night to join the House of Representatives in passing a Congressional Review Act (“CRA”) resolution to nullify the Consumer Financial Protection Bureau’s (“CFPB”) recent arbitration agreements rule. The Senate vote split 50-50, with two Republican senators—Senators Lindsey Graham (SC) and John Kennedy (LA)—voting against the resolution. The split vote set the stage for Vice President Mike Pence to cast the tie-breaking vote in favor of the resolution, which is now headed to President Trump’s desk for signature. In the hours after the vote, the President released a statement indicating his support for the resolution.

As noted in previous posts (here and here), the CFPB promulgated the arbitration agreement rule in July 2017, after a lengthy comment period for the proposed form of the rule. The CFPB sought to curb the use of class action waiver provisions in arbitration agreements that are a part of financial services or products contracts. But shortly after the CFPB promulgated the rule, the House invoked the CRA, setting up the Senate’s vote Tuesday night. The CRA allows Congress to overturn an administrative agency rule within the first 60 legislative days after it was promulgated. Once a CRA resolution is passed and signed into law, the promulgating agency may not initiate rulemaking on a similar rule unless Congress has expressly authorized the agency to do so in subsequent legislation. Given the impact of the CRA resolution, the CFPB’s effort to curb the use of class-action waiver provisions in pre-dispute arbitration agreements within the financial services industry is likely over (the Dodd-Frank Act’s legislative ban on the use of pre-dispute arbitration agreements in residential mortgage loan and home-equity line of credit agreements, 15 U.S.C. § 1639c(e), is not impacted by the CRA resolution and remains in effect).

Passage of the CRA resolution by the Senate—and its expected signing by the President—also likely brings to an end legal challenges to the CFPB arbitration agreements rule. For example, the U.S. Chamber of Commerce recently led several other financial services trade groups in launching a challenge to the CFPB rule in federal court. See Complaint for Declaratory and Injunctive Relief, Chamber of Commerce of the United States of America, et al. v. Consumer Financial Protection Bureau, et al., No. 3:17-cv-02670-D (N.D. Tex. Sept. 29, 2017). Once President Trump signs the joint CRA resolution, that suit—and others like it—will likely be moot. Thus, interested eyes now turn their attention from Capitol Hill to the White House for what will likely mark the end of the CFPB arbitration agreements rule.

Copyright 2020 K & L Gates


About this Author

Andrew Glass, KL Gates Law Firm, Financial Litigation Attorney

Mr. Glass is a partner resident in K&L Gates’ Boston office, and a member of the firm's Consumer Financial Services Litigation and Class Action Litigation Defense groups, with extensive experience in complex commercial litigation. Mr. Glass's practice focuses on the defense of federal and state class action litigation brought against consumer financial services, mortgage lending, and consumer credit institutions. These class actions concern challenges under federal statutes, including the Fair Housing Act, Equal Credit Opportunity Act, Fair Credit Reporting Act, Real...

Robert W. Sparkes III, Complex Civil and commercial Litigation, KL Gates, Law Firm

Mr. Sparkes is a partner in the Boston office of K&L Gates with extensive experience in complex civil and commercial litigation, including federal and state class action litigation. Mr. Sparkes is a member of the firm’s Financial Institution and Services Litigation group and the Class Action Litigation Defense group. He regularly represents banking, mortgage lending, mortgage servicing, consumer financial services institutions, and other business entities in consumer class actions and individual litigation matters in federal and state courts throughout the United States, including in Massachusetts, California, Missouri, Michigan, Connecticut, Ohio, Delaware, Maryland, Arizona, West Virginia, New Jersey, Vermont, Washington, Illinois, Pennsylvania, and New York. These actions often concern challenges under federal statutes, including the federal Real Estate Settlement Procedures Act, the Truth in Lending Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Racketeer Influenced and Corrupt Organizations Act, as well as state unfair and deceptive acts and practices statutes, and common law claims. Mr. Sparkes also has experience representing a variety of corporate and individual clients in contract, tort, class action, consumer protection, and other general business litigation and arbitration matters.

Roger Smerage, KLGates Law Firm, Commercial Disputes Attorney

Roger Smerage is an associate in the commercial disputes group of the Boston office of K&L Gates. He concentrates his practice in class action litigation and financial institutions and services litigation. Mr. Smerage’s experience includes representing mortgage lenders, banks, loan servicers, and other consumer financial services institutions, as well as wireless telephone companies, computer software developers, and energy providers, in class action and individual litigation matters. He has represented a variety of corporate and individual clients in contract, tort...