Congress has passed – and the Trump administration has signaled that the president will sign – a bill to roll back the Consumer Financial Protection Bureau’s sweeping arbitration rule, which the White House has called “uninformed and ineffective policy.” As we explained in our previous blog post, the rule would have banned many financial service companies from using mandatory arbitration clauses in contracts with consumers, opening the door to class action lawsuits against banks, mortgage lenders and servicers, credit card companies, and others who extend credit.

The rule’s opponents criticized it as being more favorable to class action plaintiffs’ attorneys than consumers. Or as the White House put it:

“Under the rule, consumers would have fewer options for quickly and efficiently resolving financial disputes. Further, the rule would harm our community banks and credit unions by opening the door to frivolous lawsuits by special interest trial lawyers.”

Senator Elizabeth Warren (D-MA), on the other hand, described the bill as “a giant wet kiss to Wall Street.”

Republicans in Congress used the previously obscure Congressional Review Act (CRA) to kill the rule, a step we previewed in our earlier post. (You can find more detail about the arguments for and against the rule there.) Under the CRA, Congress can stop new regulations within 60 legislative days if a majority in both the U.S. House and Senate vote for it and the president does not veto it. The House voted earlier this summer, and the Senate took action last week.

This is unlikely to be the last conflict between the CFPB and the Republican Congress. The CFPB is still led by a holdover from President Barack Obama’s administration, Richard Cordray. His term is not scheduled to end until July 2018.

A conflict is already brewing over the payday lending rule the CFPB announced earlier this month. That rule would provide additional consumer protections with “loans that require consumers to repay all or most of the debt at once, including payday loans, auto title loans, deposit advance products, and longer-term loans with balloon payments,” according to the CFPB. But some Republican lawmakers and finance companies say the result would be fewer options for consumers who already have a difficult time accessing credit.

Industry insiders speculate that rule may be Congress’ next target. One thing is clear after the recent undoing of the arbitration rule: Congress is willing to use the CRA to knock out major CFPB regulations.

Steve Carey
919.835.4011
stevecarey@parkerpoe.com

Sarah Hutchins
704.335.6639
sarahhutchins@parkerpoe.com

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Photo of Sarah Hutchins Sarah Hutchins

Sarah Hutchins practices in the area of commercial litigation, with a particular focus on competition law, and in the area of white collar crime investigation and defense. She works with clients in disputes involving business torts and antitrust claims, as well as other general commercial disputes. Ms. Hutchins has significant experience advising clients in large-scale government investigations and further advises clients on compliance with federal and state consumer privacy and protection laws. Ms. Hutchins’ practice includes management of large-scale electronic discovery matters and resolution of eDiscovery issues.

She is admitted to practice before the United States District Courts for the Western, Middle and Eastern Districts of North Carolina, the Fourth Circuit Court of Appeals, the United States District Court of the District of Columbia, and the District of Columbia Court of Appeals.

Ms. Hutchins serves as a member of Parker Poe’s Recruiting Committee and Community Service Committee. While at the William & Mary School of Law, Ms. Hutchins was a member of the Journal of Women and the Law and the William & Mary Moot Court Team.