Republicans on the House Financial Services Committee introduced a resolution of disapproval last week to nullify a Consumer Financial Protection Bureau (CFPB) rule that allows consumers to file a class action suit against banks and credit card companies.
Specifically, the CFPB rule eliminates the arbitration clause, which block people from bringing or joining group lawsuits, also known as “class action lawsuits.” Most arbitration clauses require people to bring claims individually against the company, outside the court system, before a private individual (an arbitrator). The CFPB said that companies know that people almost never spend the time or money to pursue relief when the amounts at stake are small, so few people do this. The new rule will restore the ability to file class action suits.
H.J. Res 111, sponsored by Rep. Keith Rothfus (R-PA), uses Congressional Review Act (CRA) authority to repeal this rule and prevent the bureau from issuing a similar one. The Congressional Review Act permits Congress to overturn an agency rule within 60 legislative days after an agency has submitted the rule to Congress, with a simple majority vote.
“As a matter of principle, policy, and process, this anti-consumer rule should be thoroughly rejected by Congress, and I applaud Congressman Rothfus for leading the effort in the House to do just that,” House Financial Services Committee Chairman Jeb Hensarling (R-TX) said.
Hensarling said that consumers who use arbitration gain more favorable outcomes than those who file class action lawsuits. The average payout for consumers in a class action is $32, while the average trial lawyer receives nearly $1 million, he said.
“We know that consumers get better results through arbitration than through class action lawsuits,” Rothfus said. “Despite the fact that the agency acknowledged this fact in one of its own reports, the bureaucrats at the CFPB have decided they know better. The CFPB’s rule eliminates this effective process for consumers, and will punish consumers with decreased access to financial products, increased costs for such products, or both.”
The resolution is cosponsored by all 34 Republican members of the Financial Services Committee.
A similar resolution will be introduced by the Senate Committee on Banking, Housing and Urban Affairs.
“Members of Congress previously expressed concerns with the proposed version of the rulemaking – concerns that were not addressed in the final rule,” Committee Chairman Mike Crapo (R-Idaho) said. “The rule is based on a flawed study that leading scholars have criticized as biased and inadequate, noting that it could leave consumers worse off by removing access to an important dispute resolution tool. By ignoring requests from Congress to reexamine the rule and develop alternatives between the status quo and effectively eliminating arbitration, the CFPB has once again proven a lack of accountability. Given the problems with the study and the Bureau’s failure to address significant concerns, it is not only appropriate but incumbent on Congress to vote to overturn this rule.”
Sen. Bob Corker (R-IN) said the rule does not strike the right balance in helping consumers resolve disputes.