Senate GOP pushes to repeal consumer arbitration rule

Senate GOP pushes to repeal consumer arbitration rule
© Greg Nash

Senate Republicans are looking to repeal a controversial consumer bureau rule banning companies from using forced settlements to resolve disputes with customers.

GOP senators aim to vote to repeal the Consumer Financial Protection Bureau’s (CFPB) rule on forced arbitration before a window to do so with only 51 votes closes this week.

Republicans are attempting to shore up enough votes from their slim majority to repeal the CFPB rule under the Congressional Review Act, which gives lawmakers 60 legislative days to repeal an executive branch rule after it is finalized.

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The House has already passed a repeal resolution, and Senate Republican aides said Tuesday that the upper chamber could vote to nix the rule within days.

The CFPB in July issued a rule that bans banks and credit card companies from writing clauses into customer contracts that protect the firms from class-action lawsuits. So-called forced arbitration clauses require customers to resolve any disputes with the firm through a third-party mediator, and bans them from suing the company.

Repealing the rule would be a victory for Republican leaders and CFPB critics who’ve long tried to curtail the agency’s power and influence. Business groups have slammed the regulation and the analysis used to justify it, claiming the rule would help no one but trial lawyers.

The Treasury Department and Comptroller of the Currency have also criticized the rule, warring with CFPB Director Richard Cordray and top Democratic lawmakers in op-eds and interviews.

Democrats and progressive political groups have fiercely defended the rule, insisting it would ensure vulnerable consumers have their day in court when they’ve been defrauded by banks or credit card companies.

The rule’s repeal depends on whether enough moderate or populist Republicans join the rest of their party to repeal the rule. GOP Sens. Lindsey GrahamLindsey Olin GrahamSeveral GOP lawmakers express concern over Trump executive orders Graham says he appreciates Trump orders, but 'would much prefer a congressional agreement' Sunday shows preview: White House, congressional Democrats unable to breach stalemate over coronavirus relief MORE (S.C.), Lisa MurkowskiLisa Ann MurkowskiOn The Money: Pessimism grows as coronavirus talks go down to the wire | Jobs report poised to light fire under COVID-19 talks | Tax preparers warn unemployment recipients could owe IRS Pessimism grows as coronavirus talks go down to the wire Hillicon Valley: Facebook removes Trump post | TikTok gets competitor | Lawmakers raise grid safety concerns MORE (Alaska), Susan CollinsSusan Margaret CollinsCoronavirus deal key to Republicans protecting Senate majority From a Republican donor to Senate GOP: Remove marriage penalty or risk alienating voters The Hill's Campaign Report: Trump's visit to battleground Ohio overshadowed by coronavirus MORE (Maine), John KennedyJohn Neely KennedyMORE (La.) and Rob PortmanRobert (Rob) Jones PortmanNot a pretty picture: Money laundering and America's art market Pessimism grows as coronavirus talks go down to the wire Senators holding behind-the-scenes talks on breaking coronavirus package stalemate MORE (Ohio) have not said how they’ll vote on the rule.

Senate GOP leadership began making the case for a repeal vote Tuesday. Senate Majority Whip John CornynJohn CornynCOVID-19 bill limiting liability would strike the wrong balance From a Republican donor to Senate GOP: Remove marriage penalty or risk alienating voters Skepticism grows over Friday deadline for coronavirus deal MORE (R-Texas) called on his colleagues to repeal the “harmful regulation that imposes obvious costs and offers invisible benefits.”

Cornyn called arbitration “a widely accepted method of resolving disputes between consumers and banks and other financial institutions.”

“And it actually increases the benefit that flows to the consumer, as opposed to the alternative, which is class-action lawsuits, which enriches lawyers where consumers get pennies on the dollar,” he said.

A critical Treasury Department analysis of the rule released Monday argued the CFPB measure would lead to 3,000 more class-action suits over the next five years. The department claims those suits would impose more than $500 million in legal defense fees, giving $330 million to plaintiffs’ lawyers.

The CFPB said Treasury's report "rehashes industry arguments” that were ”solidly refuted in the final rule."

"Banks, credit unions, and other companies file class-action lawsuits to pursue justice when they are harmed as a group, and our rule restores consumers’ right to do the same,” CFPB said.

“Our rigorous analysis of the costs and benefits of the rule found that mandatory arbitration clauses allow companies to avoid accountability for breaking the law and cost consumers billions of dollars by blocking group lawsuits.”

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.