Late Tuesday, the United States Senate voted to overturn the Consumer Financial Protection Bureau’s (“CFPB’s”) final rule, which prohibited inclusion of class action waivers in consumer arbitration clauses. The CFPB originally passed the final rule on July 10, 2017 to significant criticism. Many argued that the CFPB’s studies were flawed, stating that consumers receive higher awards through arbitration than class-action litigation, which provides plaintiffs’ attorneys with fee awards of up to $1 million per case but, on average, pays out $30 to each class member. The Congressional Review Act (“CRA”), created in 1996 and seldom-used before the current administration, allows Congress 60 legislative days from receipt of a regulation by Congress (or publication in the Federal Register) to rescind that regulation upon a simple majority vote of both the House of Representative and the Senate. On July 25, 2017, the House voted to nullify the rule, passing H.R. 111 by a margin of 231-190, leaving rescission of the final rule to the Senate. After much uncertainty as to whether the Senate Republicans could acquire enough votes to attain the simple majority required to overturn the CFPB’s final rule, the Senate obtained the 50 votes needed to nullify the rule (achieving a simple majority with the tiebreaking vote of Vice President Pence).
The President commended the Senate’s successful vote and stated that he plans on signing the resolution as soon as it hits his desk. In a statement, he echoed the early criticism of the CFPB’s final rule: “By repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefited the most from the CFPB’s uninformed and ineffective policy.” In addition to being a vehicle for nullifying the CFPB’s final rule, the CRA also prohibits regulators from issuing substantially similar rules to those that have been overturned by Congress. Therefore, the CFPB will be unable to “try again” and attempt to pass another rule banning class action waivers in consumer arbitration clauses. In the eyes of many, the Senate’s vote is a victory for both financial institutions and consumers alike, as it keeps down litigation costs for both sides and allows for prompt, comprehensive resolution of claims.