The Consumer Financial Protection Bureau’s ban on mandatory arbitration agreements faces almost immediate opposition from lawmakers in both Houses of Congress.
On July 10, the CFPB unveiled a rule banning mandatory arbitration agreements in contracts used by the entities it oversees, which includes auto creditors and buy-here, pay-here dealers.
By July 20, several Republicans announced they intend to file a Congressional Review Act (CRA) joint resolution of disapproval in the Senate against the arbitration rule. The move came soon after the ruler was formally noticed in the Federal Register and became subject to the CRA.
“Members of Congress previously expressed concerns with the proposed version of the rulemaking – concerns that were not addressed in the final rule,” said Idaho Sen. Mike Crapo in a press release announcing the intention to file.
Crapo is chairman of the Senate Banking Committee. His counterpart in the house, Texas Rep. Jeb Hensarling, also announced that the House Financial Services Committee has introduced a resolution of disapproval to stop the rule.
The House resolution was initially sponsored by Pennsylvania Rep. Keith Rothfus.
“The CFPB’s anti-arbitration rule hurts consumers and it’s another example of the problems caused by this rogue and unaccountable agency,” Rothfus said in a release. “We know that consumers get better results through arbitration than through class action lawsuits.”
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.
Some member of Congress have voiced their opposition to repealing the rule. Massachusetts Senator Elizabeth Warren, the architect of the CFPB, took to Twitter to voice her disapproval.
“We must have the CFPB’s back as Wall St's buddies in Congress try to roll back the rules,” she tweeted.
However, the CRA only requires a simple majority vote in both houses, so Warren and other critics can do little to stop the repeal.
The Senate resolution has 23 co-sponsors. The House resolution is cosponsored by all 34 Republican members of the Financial Services Committee
The CRA was only successful once between its creation in 1996 and this year. But it has been used 14 times so far this year.
Many CFPB watchers were surprised Director Richard Cordray went ahead with the rule.
“It was pretty bold of him to go forward,” said Terry O’Loughlin, director of compliance for Reynolds & Reynolds.