BREAKING NEWS: Another Victory for the Credit and Collection Industry - U.S. Senate Votes to Overturn Arbitration Rule

10/25/2017 8:00 AM

Republicans secured the vote against the Consumer Financial Protection Bureau’s rule as time to decide on the Congressional Review Act resolution was running out.


U.S. Senate Republicans, with Vice President Mike Pence casting the tie-breaking vote after a 50-50 split, overturned the Consumer Financial Protection Bureau’s rule to ban class action waivers in arbitration agreements in contracts for consumer financial products Tuesday night.

The Senate voted on a resolution under the Congressional Review Act (CRA), H.J. 111, which allows legislators to reverse recently finalized rules within a set timeframe based on a simple majority, which Republicans have in both the House and Senate, and the president’s approval.

ACA International CEO Patrick J. Morris applauded the vote stating that implementation of the arbitration rule would have been detrimental to consumers and the credit and collection industry.

“We applaud the Senate for protecting consumers and the industry by voting against the CFPB’s misguided rule that failed to adhere to explicit congressional directives and was unsupported by its own arbitration study," Morris said. “Individual arbitration benefits consumers by reducing the time to achieve a resolution of claims by or against consumers, and by limiting the legal and administrative fees of formal litigation."

A decision on the resolution occurred late Tuesday night and U.S. Sen. Lisa Murkowski, R-Alaska, cast the last vote creating the 50-50 split before Pence’s tie-breaking decision on the rule, according to Politico

For months, CFPB Director Richard Cordray has consistently defended the rule in the face of challenges from the Office of the Comptroller of the Currency and U.S. Department of the Treasury, among others.

Indeed, on the Senate floor Tuesday night, Senate Majority Whip John Cornyn described the CFPB as a “rogue agency,” according to Politico.

Opposition to the rule, issued in final form in July, increased in recent months. The House made its position clear on the issue in its July 231-190 vote approving H.J. 111 under the CRA.

A recent report issued by the U.S. Department of Treasury analyzing the arbitration rule found limitations in the data used to develop the rule and concluded that it would result in “extraordinary costs” for businesses.

“The CFPB did not appropriately consider whether prohibiting arbitration clauses would advance consumer protection or serve the public interest,” according to a news release from the Department of Treasury on its report “Limiting Consumer Choice, Expanding Costly Litigation: An Analysis of the CFPB Arbitration Rule.”

In September, the U.S. Chamber of Commerce and other finance industry groups filed a lawsuit to overturn the rule.

Although the CFPB’s rule did not outright prohibit arbitration agreements, its prohibition of class action waivers – coupled with new arbitral reporting requirements – was widely expected to act as de facto ban on the continued use of arbitration.  Last year, ACA submitted a comment letter opposing the arbitration rule explaining the important role played by class action waivers in offering legitimate debt collectors, especially small businesses, a way to quickly and more easily defeat inappropriate class action lawsuits.

In addition, ACA joined 28 other industry associations and organizations in a letter to the CFPB requesting it to withdraw the rule, or at a minimum, adopt a more tailored approach that would preserve consumers' access to arbitration.

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