GOP lawmakers introduce measures to repeal consumer bureau arbitration rule

GOP lawmakers introduce measures to repeal consumer bureau arbitration rule
© Greg Nash

Senate and House lawmakers introduced companion measures on Thursday to repeal the Consumer Financial Protection Bureau’s (CFPB) recently issued arbitration rule.

More than a dozen Republican senators, including most GOP members of the Senate Banking Committee, introduced a resolution Thursday morning to repeal the CFPB rule under the Congressional Review Act (CRA). GOP lawmakers on the House Financial Services Committee announced that they’d introduce an identical resolution soon after. No Democrats joined either effort.

The new CFPB rule forces companies to write arbitration clauses in ways that wouldn’t prevent consumers from joining class-action lawsuits. It also forces financial firms to hand over information about “initial claims and counterclaims, answers to these claims and counterclaims, and awards issued in arbitration.”

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The CFPB will also collect “correspondence companies receive from arbitration administrators regarding a company’s non-payment of arbitration fees and its failure to follow the arbitrator’s fairness standards,” it said Monday. The agency said the review will allow the CFPB to judge whether the process is fair and added that redacted information received would be published in July 2019.

The CRA allows lawmakers to repeal regulations released by executive branch agencies within 60 days of their finalization. Republicans in both chambers vowed to repeal the CFPB’s arbitration rule within moments of its release, and major business and bank lobbying groups promised to support those efforts. The House is expected to easily pass a repeal resolution, but the slim GOP Senate majority could derail the effort.

Senate Banking Committee Chairman Mike CrapoMichael (Mike) Dean CrapoLawmakers look to bypass Trump on North Korea sanctions Overnight Finance: What to watch for in GOP tax plan rollout | IRS sharing info with special counsel probe | SEC doesn't know full extent of hack | New sanctions target North Korean banks US Chamber opposes Trump's Export-Import Bank nominee MORE (R-Idaho) said it was essential for Congress to repeal the rule, which he called another example of the CFPB’s “lack of accountability.” The rule is the latest flashpoint in the heated relationship between the CFPB and Republicans.

Crapo also criticized the CFPB-conducted study that the bureau used to justify the rule. The CFPB reported that more than 34 million consumers received $1 billion in payments through lawsuits over the past five years. Arbitrators awarded a total of about $360,000 in relief to 78 consumers in two years of arbitration cases the CFPB studied.

“The rule is based on a flawed study that leading scholars have criticized as biased and inadequate,” Crapo said. “Given the problems with the study and the Bureau’s failure to address significant concerns, it is not only appropriate but incumbent on Congress to vote to overturn this rule.”

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said “as a matter of principle, policy, and process, this anti-consumer rule should be thoroughly rejected by Congress.”

“In the last election, the American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives. I can think of no better example of such bureaucrats than those at the CFPB,” Hensarling said. “This CRA is a critical step towards fulfilling our promise to the American people and truly protecting consumers.”

Rep. Maxine Waters (Calif.), House Financial Services ranking Democrat, said "there is no sound public policy rationale for repealing" the CFPB rule.

"It is outrageous that Republicans are trying to nullify the rule to the detriment of consumers," Waters said. "Republicans should think twice before taking away consumers’ rights to be heard in a court of law.”