Members of Congress Seek to Repeal the CFPB’s Arbitration Rule
7/13/2017 8:50:00 PM
Congressional opposition to the final rule on arbitration agreements and support of its repeal come within a day of the CFPB’s announcement.
Members of Congress are wasting no time in denouncing the final rule on arbitration announced by the Consumer Financial Protection Bureau this week and moving forward to use the Congressional Review Act to nullify it.
The CRA allows legislators to reverse recently finalized rules within a set timeframe based on a simple majority, which Republicans have in both the House and Senate, and the president’s approval.
In a statement issued July 11, U.S. Sen. Tom Cotton, R-Ark., indicated that he has started the CRA process to repeal the final arbitration rule, stating “The CFPB has gone rogue again, abusing its power in a particularly harmful way … this morning I’ve started the process of rescinding this rule using the Congressional Review Act. The last thing Americans need is more anti-business regulation that will prompt frivolous lawsuits while hurting consumers.”
U.S. Sen. Mike Crapo, R-Idaho, the chairman of the Senate Committee on Banking, Housing and Urban Affairs, told reporters he would initiate a similar effort, according to the Chicago Tribune. “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.
Other members of Congress, including U.S. Rep. Jeb Hensarling, R-Texas, the chairman of the House Financial Services Committee, and U.S. Rep. Blaine Luetkemeyer, R-Mo., also issued statements on the CFPB’s arbitration rule this week.
“As a matter of principle, policy, and process, this anti-consumer rule should be thoroughly rejected by Congress under the Congressional Review Act,” Hensarling said.
In his statement, Luetkemeyer noted the rule will “prompt more lawsuits all across the country … The agency has published its own research which states arbitration has shown to be a positive tool for consumers. Yet, this week’s announcement is in complete contradiction to its reports. This action demonstrates why the CFPB ultimately needs to be substantially reformed.”
The CFPB issued a final rule to ban class action waivers in arbitration agreements in contracts for consumer financial products on July 10, ACA International previously reported.
Under the rule, issued more than two years after the CFPB started discussion of the ban and held field hearings on the subject, “companies can still include arbitration clauses in their contracts. But companies subject to the rule may not use arbitration clauses to stop consumers from being part of a group action. The rule includes specific language that companies will need to use if they include an arbitration clause in a new contract,” according to the CFPB.
The rule will be in effect 60 days after publication in the Federal Register and applies to contracts entered into more than 180 days after that.
ACA is actively analyzing the final arbitration rule and will continue to advocate on behalf of the debt collection industry on this issue.
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