New CFPB Rule Faces Opposition in Congress
We recently reported how the controversial new Consumer Financial Protection Bureau (CFPB) rule (issued on July 10, 2017) may increase the risk of class actions for bank and credit card companies. In short, the rule, which will be codified at 12 C.F.R. part 1040 to Chapter X in Title 12 of the Code of Federal Regulations: (i) prohibits financial companies from including class action bans in their arbitration clauses; and (ii) imposes a significant reporting requirement on financial institutions, including any claims, counterclaims and awards issued in arbitration proceedings.
As anticipated, the Rule is facing significant opposition from the financial services industry, along with a recent push for invalidation by Congress under the Congressional Review Act. On July 20, the Senate Banking Committee and the House Financial Services Committee filed resolutions opposing the Rule, and ultimately seeking to bar the release of any regulation similar to the Rule. Chief among the arguments opposing the Rule are that it will harm consumers by eliminating a simple mechanism to resolve disputes, and that it is premised on flawed data contained in a 2015 arbitration study. The CFPB, which stands behind its analysis and data, contends that class action bans allow companies to avoid accountability by forcing consumers to “go at it alone or give up.”
The Congressional Review Act permits both houses to invalidate by vote the CFPB’s rule within 60 days of publication in the Federal Register. If the “resolution of disapproval” is passed and signed by the president, the CFPB’s latest efforts will be nullified. And the CFPB will be barred from proposing any future regulation that resembles its class action ban without congressional authorization.