Senate overrides CFPB arbitration rule
We are pleased to report that the U.S. Senate voted last night, 51 to 50, to override the Consumer Financial Protection Bureau’s final arbitration rule. The rule would have prohibited the use of class action waivers in consumer arbitration agreements, among other provisions.
The Senate took action pursuant to the Congressional Review Act (CRA), which allows the House of Representatives and Senate to override a federal agency’s final rule by passing a resolution of disapproval by a simple majority vote within a specified time period following the rule’s receipt by Congress. In July 2017, the House passed a joint resolution of disapproval by a vote of 231-190.
Prior to the House vote, the White House issued a statement supporting the joint resolution and stating that if the resolution “were presented to the President in its current form, his advisors would recommend that he sign it into law.” After last night’s Senate vote, the White House issued a statement applauding the Senate’s action. Accordingly, we assume that President Trump will promptly sign the resolution into law.
The Senate passed the resolution of disapproval despite Senator Elizabeth Warren’s (D-MA) strong defense of the CFPB’s rule as well as intense lobbying in support of the rule by plaintiffs’ lawyers and consumer advocates. The arbitration rule became effective on September 18, 2017, with a March 19, 2018, mandatory compliance date. Under the CRA, enactment of a resolution of disapproval blocks a rule from taking effect or continuing. The rule cannot be reissued in substantially the same form, nor can a new rule that is substantially the same be issued, unless the reissued or new rule is specifically authorized by a law enacted after the date of the resolution of disapproval.
Ballard Spahr attorneys submitted comments on the arbitration rule to the CFPB on behalf of the American Bankers Association, the Consumer Bankers Association, and the Financial Services Roundtable. Alan Kaplinsky, who leads the firm’s Consumer Financial Services Group, provided testimony on behalf of the industry at three CFPB field hearings on the arbitration rule.
Earlier today, OCC Acting Comptroller Keith Noreika issued a statement in which he called the Senate vote “a victory for consumers.” The Senate is to be congratulated for its courageous action and for recognizing, as we have advocated during the past five years of rulemaking, that arbitration benefits consumers, while class action litigation benefits only the plaintiffs’ bar.