On Wednesday, President Trump signed a joint resolution, H.J. Res. 111, which was passed by both the House and Senate, rejecting the Consumer Financial Protection Bureau’s (“CFPB”) final rule banning the use of pre-dispute arbitration clauses in consumer arbitration agreements in order to block consumers from bringing class action lawsuits. The House and the Senate utilized the Congressional Review Act (“CRA”), which permits the nullification of any rule passed by a federal agency after achieving a simple majority vote by each house of Congress. The President signed the resolution even after receiving a letter from CFPB Director Richard Cordray, which implored him to uphold the CFPB’s final rule.
In his letter, Cordray emphasized how repealing the final rule will adversely affect members of the military. His claim was erroneous, however, considering that the Military Lending Act prohibits the use of mandatory arbitration clauses and class action waivers in consumer agreements with members of the armed forces. Despite Cordray’s letter, President Trump’s decision to sign the resolution was long considered a formality as he both criticized the CFPB’s final rule prior to the Senate’s vote for nullification and praised the Senate’s successful vote, indicating his intention to sign the resolution as soon as it hit his desk. The nullification of the CFPB’s final rule has long-term implications going forward, as the CRA prohibits the CFPB from reissuing the rule and also prevents the CFPB from issuing a new rule that is substantially similar to the repealed rule without express authority from Congress, which does not appear to be forthcoming.