Three months after the U.S. House of Representatives voted on July 25, 2017 to block the Consumer Financial Protection Bureau’s (CFPB) Arbitration Rule, the U.S. Senate followed suit. On October 24, 2017, the Senate passed a joint resolution previously passed by the House disapproving of the Arbitration Rule with a 51-to-50 vote. One week later, on November 1, 2017, President Trump executed the joint resolution passed by Congress, thereby putting a nail in the Rule’s coffin. This move was unsurprising given the President’s previously-stated disapproval of the Rule. As LenderLaw Watch previously reported, the Arbitration Rule was poised to prohibit financial institutions from including arbitration clauses precluding consumers from filing class action lawsuits in consumer financial services and products contracts.
The resolutions of disapproval were made pursuant to a Congressional Review Act challenge, which permits Congress to override any final agency rule with a simple majority vote. Had the Rule not been blocked by Congress and the President, financial institutions would have had to comply by March 2018. With the repeal now effectuated and the looming March 2018 compliance deadline off the table, it remains to be seen how the CFPB and consumer advocates in favor of the Rule will respond, both in the near term and in the years to come. While the Congressional Review Act prohibits revival of the Rule “in substantially the same form,” it appears to leave open the possibility that legislation could be enacted even years from now with a new Congress that would permit reenactment of a substantially similar rule prohibiting arbitration clauses in consumer financial services and products contracts that preclude consumer class actions. See 5 U.S.C. § 801(b)(2) (“A rule that does not take effect … may not be reissued in substantially the same form, and a new rule that is substantially the same as such a rule may not be issued, unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.”). LenderLaw Watch will report on any developments to re-institute the Rule or effects of it.