Sen. Tom Cotton (R-Ark.) said Tuesday morning he would seek the repeal of a new Consumer Financial Protection Bureau (CFPB) rule cracking down on arbitration clauses in customer contracts with financial firms.
Cotton said in a statement that CFPB had “gone rogue again” with a rule released Monday meant to prevent credit card companies and banks from blocking class-action lawsuits with arbitration clauses.
The conservative senator and frequent CFPB critic said he had begun the process of repealing the rule through the Congressional Review Act. The law, which allows Congress to eliminate rules finalized within a certain timeframe, has been used frequently this year on regulations enacted late in President Obama’s term.
“The Bureau’s new rule on arbitration clauses ignores the consumer benefits of arbitration and treats Arkansans like helpless children, incapable of making business decisions in their own best interests,” Cotton said. “The last thing Americans need is more anti-business regulation that will prompt frivolous lawsuits while hurting consumers.”
Cotton’s announcement is the first congressional action to rescind the rule. House Financial Services Committee Chairman Jeb Hensarling (R-Texas), senior U.S. Chamber of Commerce officials and major bank lobbying groups have already called for it to be repealed.
House Republicans are largely united in opposition to the arbitration rule and the CFPB, but repeal efforts could falter in the Senate, where there’s a slimmer GOP majority. Only three Republican holdouts there could sink a congressional review repeal, and Democrats are unlikely to vote against the CFPB rule.
The new CFPB rule forces companies to write arbitration clauses in ways that wouldn’t prevent consumers from joining class-action lawsuits. It also forces financial firms to hand over information about “initial claims and counterclaims, answers to these claims and counterclaims, and awards issued in arbitration.”
The CFPB will also collect “correspondence companies receive from arbitration administrators regarding a company’s non-payment of arbitration fees and its failure to follow the arbitrator’s fairness standards,” it said Monday. The agency said the review will allow the CFPB to judge whether the process is fair, and that redacted information received would be published in July 2019.
The rule will take effect in 60 days and apply to contracts that begin 180 days after that.
CFPB Director Richard Cordray said Monday that he knew the rule could be repealed by Congress, adding that he felt obligated to do what he thought was best for the American people.