November 21, 2017

CFPB officially rescinds arbitration rule

The CFPB today published its action in the Federal Register to remove the bureau's final arbitration rule from the federal code, effective immediately. The notice comes after President Donald Trump signed a congressional joint resolution disapproving of the rule earlier this month.

Released in July, the CFPB's final arbitration rule would have prohibited the use of clauses that prevent consumers from entering into class action litigation, so-called "class action waivers."

Under the Congressional Review Act, legislators can vote to overrule new federal regulations with a joint resolution of disapproval within 60 legislative days after regulators have submitted the rule to Congress. The House passed the resolution disapproving of the arbitration rule in July, and the Senate passed the resolution at the end of October.

NAFCU President and CEO Dan Berger attended the president's signing of the resolution at the White House; NAFCU was the only credit union trade group in attendance. The association had argued that the conclusions derived from the CFPB's final arbitration study were unfounded and did not support the proposal. It warned the rule would have several unintended consequences for credit unions and their members, including increased costs.

A Treasury Department report released last month supported NAFCU's argument and found that the CFPB's arbitration rule would come with "extraordinary costs," including creating more than 3,000 additional class action lawsuits over the next five years and shifting $330 million to plaintiffs' lawyers. The report examined the analysis the CFPB used to prohibit mandatory arbitration clauses in its rulemaking and outlines important limitations to the data behind the bureau's rule. The report also explained that the CFPB did not appropriately weigh whether prohibiting arbitration clauses would serve public interest.

NAFCU is supportive of other congressional efforts to reform the CFPB and continues to advocate for moving the bureau's leadership from a single director to a bipartisan commission.

NAFCU will continue to seek a blanket exemption for credit unions from CFPB rulemaking.