On November 1, President Donald J. Trump signed a resolution passed by Congress to nullify the Consumer Financial Protection Bureau’s Arbitration Rule. As we reported here, the Senate narrowly passed a resolution to repeal the Rule in late October, ensuring that the controversy would make its way to the President’s desk. Trump’s signature ensures that the hotly-debated Rule will not go into effect in early 2018 as scheduled.
CFPB Director Richard Cordray sent a letter to President Trump last week, urging him to veto the efforts to invalidate the Rule. Cordray styled the letter as “a personal appeal” to the President, asking him to uphold the Rule. “Many have told me I am wasting my time writing this letter – that your mind is made up and that your advisors have already made their intentions clear,” Cordray wrote. “But this rule is all about protecting people who simply want to be able to take action together to right the wrongs done to them.” Cordray also cited the views of the American Legion and the Military Coalition in his appeal to the President, as both groups recently came out in support of the Rule.
The President put to rest any speculation on November 1. As expected, he signed the measure into law in a move lauded by many in the banking industry. “Arbitration is a well-established and tested process that offers better results for consumers and helps avoid frivolous class-action suits, which serve the interest of trial lawyers at the expense of community banks and consumers,” said Camden R. Fine, President and CEO of the Independent Community Bankers of America. “ICBA thanks the president for swiftly signing this measure into law because it preserves community banks’ contractual right to pursue fair and timely resolution through arbitration and avoid prohibitively expensive and protracted litigation.”
By signing off on the measure, the President ended months of debate over the Rule and mooted pending litigation challenging the Rule. On July 25, 2017, only two weeks after the Bureau issued the Rule, the House of Representatives voted to repeal the Rule under the Congressional Review Act, which permits Congress to overturn regulations with a simple majority vote. Republican representatives argued that the Rule would negatively affect business, while House Democrats countered that the Rule protects Americans’ right to seek redress of harms in court. In the weeks leading up to the Senate’s vote, Democratic AGs from around the nation urged lawmakers to vote against the measure, and consumer advocates branded the legislation as a boon to financial institutions. Meanwhile, the Department of the Treasury released a report critical of the Rule, claiming that it rested on a shaky foundation of cherry-picked data. The Senate approved the repeal on October 24 in another party-line vote.