In the wake of the Consumer Financial Protection Bureau unveiling a new rule to ban companies from using mandatory arbitration clauses, Sen. Tom Cotton, R-Ark., immediately announced that he was launching an effort in the Senate to rescind the rule, stating that the CFPB has “gone rogue again” and is “abusing its power.”
Now, Republicans in the House of Representatives are joining their Senate colleagues in moving to repeal the CFPB’s controversial rule.
On Thursday, Republicans on the House Financial Services Committee introduced a “resolution of disapproval” to revoke the CFPB rule.
The resolution is co-sponsored by all 34 Republicans on the House Financial Services Committee and mirrors a similar resolution that is expected to be introduced this week in the Senate.
Specifically, H.J. Res 111, which is sponsored by Rep. Keith Rothfus, R-Pennsylvania, makes use of Congress’ authority under the Congressional Review Act to “repeal this harmful rule and prevent the Bureau from issuing any similar rule relating to arbitration.”
Under the Congressional Review Act, Congress may overturn a broad range of regulatory rules issued by federal agencies by enacting a joint resolution of disapproval within 60 days of the rules being announced.
In the case of the CFPB arbitration rule, the rule deals with consumer financial products like credit cards and bank accounts that contain arbitration clauses in their contracts that prevent consumers from joining together to sue their bank or financial company for wrongdoing.
Mortgages are not included because arbitration agreements are already prohibited in the residential mortgage market.
According to the Republicans on the House Financial Services Committee, the CFPB rule “benefits class action trial attorneys at the expense of consumers.”
In a statement, Rothfus, the bill’s main sponsor, said that the CFPB rule will hurt consumers and is the result of a “rogue and unaccountable” agency.
“We know that consumers get better results through arbitration than through class action lawsuits,” Rothfus said.
“Despite the fact that the agency acknowledged this fact in one of its own reports, the bureaucrats at the CFPB have decided they know better,” Rothfus added. “The CFPB's rule eliminates this effective process for consumers, and will punish consumers with decreased access to financial products, increased costs for such products, or both.”
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, joined Rothfus in expressing his displeasure with the CFPB rule.
“As a matter of principle, policy, and process, this anti-consumer rule should be thoroughly rejected by Congress, and I applaud Congressman Rothfus for leading the effort in the House to do just that,” Hensarling said.
“In the last election, the American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives,” Hensarling continued. “I can think of no better example of such bureaucrats than those at the CFPB. This CRA is a critical step towards fulfilling our promise to the American people and truly protecting consumers.”
Unsurprisingly, the ranking Democrat on the House Financial Services Committee sided with the CFPB and criticized the Republicans’ effort to repeal the arbitration rule.
“The Consumer Bureau’s forced arbitration rule ensures that consumers are not required to sign away their legal rights in order to open a bank account, obtain a credit card, finance a car, or obtain a private student loan,” Rep. Maxine Waters, D-Calif.
“The development of the rule was a methodical, well-thought-out process, in consultation with other federal financial regulators. In 2015, after extensive study, the Consumer Bureau issued a 728-page report on forced arbitration clauses, which found, among other things, that arbitration agreements limit relief for consumers, meaning that when consumers are wronged by a financial institution and are covered by an arbitration agreement, they will recover less money,” Waters continued.
“The rule is important for consumers and there is no sound public policy rationale for repealing it,” Waters concluded. “It is outrageous that Republicans are trying to nullify the rule to the detriment of consumers. Republicans should think twice before taking away consumers’ rights to be heard in a court of law.”