On Wednesday, November 1, 2017, President Donald Trump signed legislation repealing an anti-arbitration rule that the Consumer Financial Protection Bureau (“CFPB”) had promulgated in early July. Repeal of the CFPB rule was welcomed by representatives of the financial services industry.
On July 10, 2017, the CFPB issued its final rule regarding arbitration agreements in contracts for certain types of consumer financial products and services. The final rule prohibited banks and other financial service entities from using agreements with consumers that provided for arbitration of any future dispute between the parties in order to bar consumers from filing or participating in class action lawsuits concerning the covered product or service.
Later in July, the U.S. House of Representatives, acting largely along party lines, voted 231 – 190 to overturn the CFPB’s final rule. On October 24, 2017, the U.S. Senate followed suit by voting 51 – 50 to appeal the CFPB’s final rule. Vice President Mike Pence cast the tie-breaking vote after two Republican senators, Lindsey Graham of South Carolina and John Kennedy of Louisiana, voted with Democrats against repeal of the final rule.
Following President Trump’s signing of the repeal legislation, banks and financial service companies remain free to include mandatory arbitration clauses and class action waivers in their consumer agreements. Representatives of the financial services industry generally believe that arbitration is a simpler, more flexible, and faster process for resolving consumer disputes than litigation in courts.
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