Senate Votes to Overturn CFPB Arbitration Rule
Late last night, the US Senate voted 51 to 50 to repeal a Consumer Financial Protection Bureau (CFPB) rule prohibiting class action waivers in arbitration agreements. All but two Republicans (Senators Lindsey Graham (SC) and John Kennedy (LA)) voted to repeal the CFPB’s arbitration rule while all Democrats voted against repeal. Vice President Mike Pence broke the 50-50 tie. In July, the House also voted to repeal the CFPB arbitration rule. President Trump is expected to sign the resolution. In a statement following the Senate vote, the President said: “By repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefitted the most from the CFPB’s uninformed and ineffective policy.”
The Senate vote came on the heels of a report from the U.S. Treasury finding that the CFPB’s arbitration rule would bring little benefit to consumers at great cost. Earlier this fall, a review by the Office of the Comptroller of the Currency also determined that the CFPB’s arbitration would likely cause significant increase in credit costs to consumers.
The House and Senate voted to repeal the CFPB rule under the Congressional Review Act (“CRA”), which allows Congress to overturn a recently finalized agency rule by a majority vote. Significantly, the CRA does not just repeal the rule. Under the CRA, the rule cannot be “reissued in the same form” nor can a “new rule” that is “substantially the same” as the disapproved resolution be issued unless such action is specifically authorized by a law enacted subsequent to the disapproval of the original rule.
In light of these recent developments in Congress and the continued enforcement of arbitration agreements in the courts, it is more important now than ever to review your use of arbitration agreements and ensure that your agreements are up to date, include the latest guidance from courts, and contain the provisions you need, such as class action waivers. Squire Patton Boggs has seasoned and experienced regulatory, litigation, and policy lawyers who can ensure that your arbitration agreements will be enforceable and effective in reducing litigation costs.