CFPB’s Proposed Arbitration Reg May Not Be Long for This World
The Consumer Financial Protection Bureau’s (“CFPB”) proposed regulation governing predispute arbitration agreements in contracts involving financial products and services – if not the Bureau itself – may face rough sledding in 2017, if recent activity in Congress is any indication.
As we have reported many times, the Consumer Financial Protection Bureau (“CFPB”) on May 5th released a proposed rule that would: 1) ban class action waivers (“CAWs”) in predispute arbitration agreements (“PDAAs”) in contracts for consumer financial goods and services; and 2) require regulated financial institutions to file customer claims and Awards with the CFPB, which it may choose to publish. A staggering 51,801 comments contained in 6,246 comment letters (ed: many letters had multiple signatures), were filed by the close of the comment period. The Bureau on November 30th updated its 2017 rulemaking agenda to reveal that it intends to publish a final arbitration rule in February 2017.
GOP House Freedom Caucus Report
The House Freedom Caucus has released a report to President-elect Trump urging that the incoming administration roll back more than 200 rules and regulations it considers wasteful. The First 100 Days: Rules, Regulations, and Executive Orders to Examine, Revoke, and Issue, was announced in a December 14th Press Release from Rep. Mark Meadows (R-NC). Nestled on page 20 of the 21-page index is item number 215 – the Consumer Financial Protection Bureau’s proposed arbitration rule. Says Representative Meadows: “These last 8 years, we have seen a disturbing trend of the federal government unnecessarily inserting themselves more and more into the lives of hardworking Americans – and the results have been economically disastrous. When the American people spoke on November 8, they provided conservatives with an opportunity to restore order in our government and to remove the out-of-control bureaucratic red tape that so often stunts the growth of otherwise successful Americans. My colleagues and I look forward to helping President-elect Trump in any way we can as we work toward the most productive ‘first 100 days’ in modern history. To the working people who have felt the burden of these last 8 years so heavily — help is on the way.” The Report estimates that the arbitration reg, if implemented, would cost $379 million.
Bill to Replace Dodd-Frank Reported Out of Committee
On September 9, House Financial Services Committee Chairman Jeb Hensarling (R-TX) introduced the Financial CHOICE Act. If enacted, the massive H.R. 5983 would essentially repeal and replace Dodd-Frank and would have a far-ranging impact. A Committee Release from June announcing the plan to introduce the CHOICE Act promised to “fix the Dodd-Frank-Volker Rule…. Concocted in 2010, the rule was designed to prevent banks from engaging in proprietary trading. Of course, not one of the 450 institutions that failed in 2008 and 2009 failed due to proprietary trading.” The bill was reported out of Committee in September, but the revised text was not posted until December 20. Unchanged is Section 338, which would strip the Consumer Financial Protection Bureau of its authority to regulate arbitration: “Section 1028 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5518) is hereby repealed.” Naturally, if section 1028 goes, so does the CFPB’s proposed rule. Also, section 311 is changed to amend Dodd-Frank section 1011 to rename the CFPB. It would be known as the “Consumer Financial Opportunity Commission.” Also unchanged in the latest draft is restructuring the CFPB to a five-member Commission like the SEC, and repeal of section 921, which authorizes SEC to ban, limit, or impose conditions on PDAA use.
(ed: *As we’ve said before, we think this rule – if not the CFPB or even Dodd-Frank – is a goner. **The full 21-page Freedom Caucus report can be viewed here. ***We continue to believe that the CHOICE Act won’t be passed before the end of this year, and that it would face a veto by President Obama in any event. Perhaps it will form the template for President-elect Trump’s plan to repeal and replace Dodd-Frank in 2017? On the other hand, the non-partisan GovTrack.us Website gives the bill a 24% chance of being enacted, and states: “A committee has voted to issue a report to the full chamber recommending that the bill be considered further. Only about 1 in 4 bills are reported out of committee.”) (SAC Ref. No. 2016-48-04)
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