A group of financial industry associations has filed suit over the controversial “Arbitration Rule” adopted by the Consumer Financial Protection Bureau (CFPB). This rule would force an end to the use of “mandatory arbitration” clauses in terms of use agreements that mandate consumers use an arbitration process to resolve disputes. These clauses prevent signatories from engaging in litigation, particularly in class action lawsuits.
On September 29, the U.S. Chamber of Commerce, American Bankers’ Association, American Financial Services Association, Consumer Bankers Association, Financial Services Roundtable, and a number of other trade groups sued the CFPB and its director Richard Cordray. The suit alleges that the rule is invalid for four reasons:
That the rulemaking process violated the Administrative Procedure
applied defective methodologies, misapprehended the relevant data, and failed to address key considerations.”
or consumer welfare: it precludes the use of a dispute resolution mechanism that generally
benefits consumers (i.e., arbitration) in favor of one that typically does not (i.e., class-action
litigation)”
There has been speculation in recent days that the Senate may soon vote to repeal the rule under the Congressional Review Act. However, the Senate may not be able to act as soon as was initially thought. Those with apparent inside knowledge of the suit have told Bloomberg that it will be withdrawn if the Senate successfully repeals the rule. The suit comes on the heels of a report from the Office of the Comptroller of the Currency that estimated that if the rule were to come into effect, it would increase the cost of credit for consumers by 25 percent. The lawsuit asks for the rule to be thrown out before its effective compliance date of March 19, 2018.
To read the full court filing, click here. To read Consumers’ Research’s op-ed on the topic of the Arbitration Rule, click here.
- David Weissmanhttps://consumersresearch.org/author/dweissman/
- David Weissmanhttps://consumersresearch.org/author/dweissman/
- David Weissmanhttps://consumersresearch.org/author/dweissman/
- David Weissmanhttps://consumersresearch.org/author/dweissman/