Congress moves to overturn CFPB arbitration rule

The U.S. House of Representatives has passed a bill that would scrap the CFPB’s arbitration rule while the Senate took up a similar measure expected to come to a vote next month.

Last month, the U.S. House of Representatives passed a bill that would scrap the new arbitration rule put forward by the Consumer Financial Protection Bureau.

Last week, the Senate also took up the measure, where it is expected to come to a vote in September. President Trump has already indicated that he would sign the bill into law if it landed on his desk, saying the administration “strongly supports” the repeal effort.

The House relied on the Congressional Review Act, which provides expedited procedures for passing legislation rescinding any regulation that was finalized in the preceding 60 session days by simple majority votes in each chamber. There is no need for prior committee consideration by either chamber, and the measure is exempt from a possible Senate filibuster.

Once the CRA resolution of disapproval is signed by the President, the rule is rescinded. Once the regulation has been successfully voided, the regulatory agency is permanently barred from reviving the rule in “substantially the same form” in the absence of new legislative authority.

The rule, officially enacted July 10, prohibits mandatory class-action waivers in virtually all consumer service agreements. Currently, most regulated industries include these waivers to shield themselves from class-action suits.

“The CFPB’s new rule will deter wrongdoing by restoring consumers’ right to join together to pursue justice and relief through group lawsuits,” the bureau said in a press release announcing the rule.

Critics argue that arbitration is preferable for consumers. Rep. Keith Rothfus (R-PA), the lead House sponsor of the measure to overturn the CFPB rule, described the rule as “pro-trial lawyer, anti-consumer, anti-arbitration.” He also cited a CFPB study that stated the average recovery for members of a class action is $32, while the average from arbitration is $5,389. Critics also point out that the threat of class action suits will drive up costs for companies, who will likely pass that cost along in the form of higher premiums and fees.

Sen. Tim Scott (R-SC), a co-sponsor of the U.S. Senate measure to overturn the rule, said in a statement, “Time and time again, the CFPB has overreached with misguided efforts and has actually hurt the folks it claims to want to protect. The arbitration rule is just one more example, which will end up raising consumer costs and blocking our already overloaded judicial system.”