WASHINGTON — President Trump has signed the congressional measure invalidating the Consumer Financial Protection Bureau’s arbitration rule, killing the regulation that was unpopular with banks and other financial institutions.
The president signed H.J. Res. 111 in a closed meeting Wednesday afternoon, offering no public statement. The White House confirmed that the president signed the resolution in a statement to the White House press pool.
The rule, which the CFPB issued in July, would have prohibited financial companies from requiring consumers to forfeit their right to sue the firms in class actions as part of their use agreements. Such “mandatory arbitration” clauses — which can be found in agreements with credit card companies, payments processors and banks — steer legal disputes toward extrajudicial arbitration venues, which the CFPB argued unfairly favor the companies over the consumers.
The rule has been the source of a months-long and unprecedented dispute between regulators about whether the CFPB’s reasoning behind the rule was justified. Acting Comptroller of the Currency Keith Noreika asked the CFPB to delay publication of the rule in the Federal Register so as to give OCC staff more time to examine the CFPB’s data. CFPB Director Richard Cordray fired back in a New York Times op-ed in August, saying concerns about the rule’s impact were exaggerated.
More recently, Cordray appealed to Trump directly, asking him not to sign the resolution because of the negative impact it would have on average American families.
“I think you really don't like to see American families, including veterans and service members, get cheated out of their hard-earned money and be left helpless to fight back," Cordray wrote. "I know that some have made elaborate arguments to pretend like that is not what is happening. But you are a smart man, and I think we both know what is really happening here."
The House of Representatives passed a resolution under the Congressional Review Act to negate the rule in July, and the Senate voted only last week to a similar resolution, which passed by a 51-50 margin, with Vice President Mike Pence casting the tie-breaking vote.
Financial industry organizations praised the move.
Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions, was on-hand for the signing, and NAFCU praised the president's action to kill the rule.
"NAFCU strongly supports consumer protections, but credit unions were not the bad actors this rule was meant to target," Berger said. "We appreciate President Trump and Congress for their leadership and listening to our concerns and working to ensure consumers and institutions have access to various forms of dispute resolution. NAFCU is honored to have been invited to the White House to watch the undoing of a rule that likely would have had negative effects on the credit union industry."
Berger was joined at the White House by NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt.
The Credit Union Natoinal Association also spoke out in favor of the move, calling it "a win for credit unions." CUNA Chief Advocacy Officer Ryan Donovan penned an op-ed for Credit Union Journal recently touting the reasons the trade group supported repealing the rule.
“The repeal of the CFPB’s arbitration rule is a win for credit unions, as well as a positive sign that Congress is willing to intervene when it comes to ill-tailored rules not narrowly focused on abusers of consumers,” CUNA President/CEO Jim Nussle said in a statement. “CUNA, leagues and credit unions will build on this momentum that one-size-fits-all rulemaking from the CFPB does not make sense for smaller financial institutions like credit unions moving forward as we work to achieve additional regulatory relief objectives.”
Consumer Bankers Association President and CEO Richard Hunt said in a statement that the arbitration rule was “never about protecting consumers; rather, it was about protecting trial lawyers and their wallets.”
Independent Community Bankers of America CEO Camden Fine added that arbitration is a “well-established and tested process that offers better results for consumers” and praised the president for “swiftly signing this measure into law.”
Noreika also praised Trump’s signing of the resolution, saying in a statement that it “stops a rule that likely would have significantly increased the cost of credit for hardworking Americans and taken away a valuable tool for resolving differences among banks and their customers.”