GOP Targets Rule That Could Expose Banks to Wave of LawsuitsBy
Lawmaker says Crapo is leading Congressional Review Act effort
Measure lets Congress reverse agency rules with majority votes
Senate Republicans led by Banking Committee Chairman Mike Crapo are preparing legislation to overturn a Consumer Financial Protection Bureau rule that would make it easier for customers to sue banks.
The lawmakers want to use the Congressional Review Act to reverse the CFPB restrictions on forced arbitration agreements before Congress recesses next month, Senator Tom Cotton said Wednesday at an industry event in Washington. The Arkansas Republican said he is working with Crapo to get enough votes to pass the measure and that the Senate is likely to take it up after the House passes a bill, which he expects to happen next week.
“I think we can get this done,” Cotton said at the forum held by the U.S. Chamber of Commerce, which opposes the arbitration rule. “The clock is starting now.”
The CFPB rule, released July 10, is meant to restrict the longstanding industry practice of using arbitration agreements in financial contracts to keep grievances tied to credit cards, payday loans and other products out of courts. The Congressional Review Act gives lawmakers the power to undo regulations within 60 legislative days from when they are published. The law requires only a simple majority vote for passage, meaning Senate Republicans wouldn’t need support from Democrats.
Cotton said that he expects every Republican on the Banking Committee will support a measure to kill the CFPB rule. Senators including Crapo and Pat Toomey have already said they support using CRA. Overturning the rule has much better prospects in the House, where Financial Services Chairman Jeb Hensarling has also said he will consider it.
A spokesman for Hensarling didn’t respond to requests for comment about Cotton’s remarks.
Banks have long opposed restrictions on arbitration agreements, arguing that they lead to better outcomes for consumers than litigation, and that much of the money won through lawsuits goes to trial lawyers. Consumer advocates say mandatory arbitration prevents consumers from getting their day in court and lets financial companies cheat customers without being held accountable.
Despite Cotton’s optimism, there’s no guarantee that the bill will pass because Republicans have such a slim majority in the Senate. Several obstacles lie ahead as lawmakers remains bogged down with President Donald Trump’s call for undoing Obamacare and advancing his picks to run key agencies.
If Republicans aren’t able to pass the bill overturning the CFPB rule, it doesn’t bode well for prospects of passing wider regulatory relief. The president and congressional Republicans have vowed to overhaul the Dodd-Frank Act, which they say has stunted economic growth. In June, the House passed a bill to rip up much of the 2010 law, but the overhaul as written has little chance of advancing in the Senate.
Crapo has pledged to work with Senator Sherrod Brown of Ohio, the banking committee’s top Democrat, to craft bipartisan legislation. Democrats including Brown are supportive of the CFPB’s arbitration rule.
“It’s no secret Senator Crapo and I don’t agree on everything, but that won’t stop us from working together on areas where we can find common ground,” Brown said in a statement. “Access to the justice system is a fundamental consumer protection, and I will keep fighting for what I think is right for working families.”
Passing legislation is one strategy the Trump administration may use to undermine the CFPB rule. Dodd-Frank also allows a regulator to petition the Financial Stability Oversight Council -- a panel of regulators led by the Treasury secretary -- to set aside any consumer bureau rule if there’s evidence it puts the financial system’s overall safety at risk. Acting Comptroller of the Currency Keith Noreika has taken steps to use those powers to delay the rule. It’s also possible that industry groups will sue to overturn the rule.