August 7, 2017
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Industry Waits on Arbitration Ban’s Fate
IN JEOPARDY: Robert Cordray, director of the Consumer Financial Protection Bureau, testifies before the Senate banking committee. The committee brought a resolution to the full Senate that would eliminate the CFPB’s recent ban on mandatory arbitration agreements.
By Ted Craig
Rush - Dated Material
The Consumer Finance Protection Bureau inally released its rule banning mandatory arbitration, but it seems unlikely to ever take efect. The CFPB unveiled the rule, which bans mandatory arbitration agreements in contracts used by the entities it oversees, which includes auto creditors and buy-here, payhere dealers, on July 10. But just over two weeks later, the U.S. House of Representatives voted 231-190 to use the Congressional Review Act on the new rule. Senate Republicans already announced they intend to ile their
own CRA joint resolution of disapproval against the arbitration rule. The Congressional Review Act permits Congress to overturn an agency rule within 60 legislative days after an agency has submitted the rule to Congress. Once the rule is overturned, another rule cannot replace it. The CRA only requires a simple majority vote in both houses. “Members of Congress previously expressed concerns with the proposed version of the rulemaking – concerns that were not addressed in the inal rule,” said Idaho Sen. Mike Crapo in a press release announcing the Senate’s intention to ile.
Crapo is chairman of the Senate Banking Committee. If the rule does go through, it will open up irms covered by the CFPB to class-action lawsuits. Existing agreements specify that consumers must settle disputes via arbitration and are barred from joining classaction suits. “These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up,” said CFPB Director Richard Cordray in a release announcing the rule. “Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed
together can take action together.” Industry insiders have been waiting for this rule since Congress passed the Dodd-Frank Act that created the CFPB. The act speciically called for a study into the impact of arbitration. The CFPB released the indings of that study in 2015 and a rule has been expected ever since. But many thought that might change after last year’s election. “It was pretty bold of him (Cordray) to go forward,” said Terry O’Loughlin, director of compliance for Reynolds & Reynolds.
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