By Elva M. Coffey-Sears, CRCM, CRP
We reported last August that, on July 19, 2017, the CFPB published a final rule and official interpretations to regulate arbitration agreements in contracts for specified consumer financial products and services. On July 25, 2017, the House of Representatives, using the Congressional Review Act, passed a resolution to repeal the rule. The stage is set for the demise of that rule.
On October 24, 2017, Vice President Pence cast the tie-breaking vote in the Senate to overturn the rule. President Trump is expected to sign the bill to repeal the rule when it reaches his desk.
Why do Congress and the President want to repeal the Arbitration Rule? The primary source of controversy surrounding the rule is the CFPB study behind the rule. According to the CFPB, the study shows that arbitration agreements limit legal remedies available to consumers. Opponents of the rule believe that arbitration provides consumers with expeditious resolution at a lower cost than legal action. Further, trade associations and the OCC oppose the rule, indicating it would likely cause decreased availability of credit or increased cost of credit products. A U.S. Department of the Treasury report released on 10/23/17 questions the reliability of the CFPB’s study and concludes that the rule “… will generate massive economic costs – borne by businesses and consumers alike – that dwarf the speculative benefits of the Bureau’s increase in compliance.” https://www.treasury.gov/press-center/press-releases/Documents/10-23-17%20Analysis%20of%20CFPB%20arbitration%20rule.pdf
This debate on arbitration agreements ends with the President’s signature on the bill. Under the Congressional Review Act, once a rule is repealed future adoption of “substantially similar” rules is prohibited unless authorized by a new law passed after the date of the repeal. Don’t look for a new law from the current Congress.
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