After the Consumer Financial Protection Bureau (CFPB) released its regulation prohibiting class action waivers in arbitration clauses in consumer finance contracts, the industry was quick to condemn it, especially because the CFPB’s own findings contradicted the rule. Shortly after the new rule was announced, the House of Representatives voted to eliminate the rule. After its recess, the Senate also voted to reject the rule with Vice President Pence casting the tie-breaking vote. CFPB chief, Richard Cordray attempted to save the CFPB’s rule by sending a letter to President Trump asking him to uphold the CFPB’s rule. Despite that last-ditch effort, President Trump signed Congress’s joint resolution, officially overriding the CFPB’s rule. This is only the sixteenth time the Congressional Review Act has been used to invalidate a regulation since the Congressional Review Act was enacted in 1996.
In a statement, the White House said that “the CFPB's rule would neither protect consumers nor serve the public interest. Rather, under the rule, consumers would have fewer options for quickly and efficiently resolving financial disputes. Further, the rule would harm our community banks and credit unions by opening the door to frivolous lawsuits by special interest trial lawyers. 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 benefited the most from the CFPB's uninformed and ineffective policy.”
This is a significant victory for the financial services industry as it will continue to allow parties to continue to utilize arbitration, free from class action lawsuits, to resolve any issues they may have. Pursuant to the Congressional Review Act, a rule that does not take effect due to a joint resolution of disapproval from Congress cannot be reissued “in substantially the same form.” Thus, the CFPB will not be able to try to reissue the same rule again.