U.S. Chamber of Commerce and Other Finance Industry Groups File Lawsuit to Overturn CFPB’s Arbitration Rule


10/4/2017 2:30:00 PM

The legal challenge, filed in the Northern District of Texas, provides another attack on the flawed rule while legislative efforts to repeal the final rule under the Congressional Review Act continue.

NewsCFPB

Challenges against the Consumer Financial Protection Bureau’s arbitration rule are increasing as several financial trade groups, including the U.S. Chamber of Commerce, filed a lawsuit to overturn the rule that took effect on Sept. 18.

“The groups argue that the rule is ‘fatally infected by the unconstitutional structure’ of the CFPB, which has a single director only removable for cause. They also claim that the agency violated the Administrative Procedure Act by limiting public participation in ‘a deeply flawed study’ and by failing ‘to take account of important aspects of the problem it purports to address,’” Politico reports.

The CFPB rule, which bans class action waivers in arbitration agreements in contracts for consumer financial products, applies to pre-dispute arbitration agreements entered into on or after March 19, 2018.

In addition to the U.S. Chamber of Commerce,  the American Bankers Association, American Financial Services Association, Consumer Bankers Association, Financial Services Roundtable and a group of associations in Texas filed the lawsuit in the Northern District of Texas, Politico reports.

"For years, our organizations have tried to work with the CFPB to promote strong consumer protection while maintaining a functional arbitration system," the groups said in a statement, according to the article.

Meanwhile, congressional efforts to overturn the final rule using the Congressional Review Act (CRA) continue. The CRA process to nullify the mandatory arbitration rule commenced after the final rule was announced by congressional opponents who quickly filed resolutions in both the House and Senate.

The CRA 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.

For its part, the U.S. House of Representatives, in a 231-190 vote along party lines, approved resolution, H.J. Res. 111, sponsored by U.S. Rep. Keith Rothfus, R-Pa. on July 25.

A majority of members of the U.S. Senate Committee on Banking, Housing and Urban Affairs filed a resolution to repeal the CFPB’s arbitration rule, H.J. Res. 111. There has not yet been a final vote.

In October 2016, ACA International submitted comments strongly opposing the CFPB’s proposed arbitration rule. In its comments, ACA urged the CFPB to withdraw the rule and take a more balanced approach that will allow it to achieve the same public policy goals that it purports to achieve through a ban on class action waivers, but in a way that preserves individual arbitration, does not run afoul of explicit congressional directives, and is fair for consumers and compliance-minded businesses.

Follow ACA on Twitter @ACAIntl and @acacollector or Facebook for news and event updates. ACA’s LinkedIn Group includes news updates, member discussions, event promotions, jobs and more. Visit the group page and request to join today. Subscribe to ACA Daily, Collector magazine and update your email subscription preferences by visiting the publications page. ACA members can get email notifications when each new digital issue of Collector magazine is available by logging in here; members and nonmembers can also purchase a print subscription. Nonmembers can create a guest profile on ACA’s website to subscribe to available publications.

NEWSROOM

Loading...

Loading...