On Tuesday evening, the U.S. Senate voted to overturn the Consumer Financial Protections Bureau’s (CFPB) rule prohibiting arbitration clauses containing class actions bans. Vice President Mike Pence broke the 50-50 tie. All Republicans, with the exception of Lindsey Graham and John Kennedy voted against it. Both the Office of the Comptroller of Currency and the U.S. Department of Treasury had previously spoken out against the arbitration rule, arguing that it had the potential to harm consumers and did not offer a substantial benefit.
A couple things to consider after the Senate vote:
- Will the CFPB seek to utilize its supervisory and enforcement authority to examine and review arbitration practices and policies for potential unfair, deceptive and abusive acts or practices? While the Senate has overturned the rule which would have provided guidance on a macro level, the CFPB does still have the authority to examine and allege that arbitration practices of an institution, if improperly used could be considered an unfair, deceptive or abusive act or practice.
- Is this a future roadmap to challenging the CFPB’s Rulemaking Authority? The CFPB’s Payday Lending rules, which were released in September have been met with industry complaint. With a small republican majority in the Senate, it will be very interesting to watch the challenge and potential success in reigning in the rules drafted by the CFPB currently and in the future.
While the CFPB Arbitration Rule may be dead at the moment, it is very clear that arbitration provisions and the impact to the CFPB more generally will continue to evolve in the near future.