It’s official. President Donald Trump killed the CFPB Arbitration Rule on Wednesday, taking away the chance that consumers may have had to file class actions against banks and other financial firms.
The president signed a resolution passed by both houses of Congress under the Congressional Review Act that nullified the CFPB rule, which was released in July. (AP)
Trump signed a resolution passed by both houses of Congress under the Congressional Review Act that nullified the CFPB rule, which was released in July and aimed to eliminate class action bans included in arbitration clauses on consumer financial contracts.
The U.S. Senate passed its version of the CRA resolution of disapproval of the CFPB’s arbitration rule on a 51-50 vote with Vice President Mike Pence breaking a tie on Oct. 24. That followed a July vote in the U.S. House of Representatives to overturn the rule.
But a brief delay in Trump putting his signature on the joint resolution gave advocates a sliver of hope that they would be able to change the president’s mind.
The American Legion, the country’s largest veterans group, came out in favor of the rule and urged the president not to sign the CRA measure after the Senate passed it, joining other veterans’ organizations that had opposed it.
Trump’s signature on the Congressional resolution dashed any remaining hopes, and left consumer advocates vowing to continue their fight to end forced arbitration clauses in financial services, employment and other contracts.
“President Trump had a clear choice to make today between Wall Street and the rest of us. He chose Wall Street. But the rest of us will keep fighting to restore our rights so we can fight back the next time a company like Wells Fargo or Equifax tries to rip us off and get away with it,” Amanda Werner of Americans for Financial Reform and Public Citizen, said in a statement.
CFPB Director Richard Cordray sent a letter to the president last week urging him to keep the rule alive, noting that Trump’s long litigation history should make him understand the importance of consumers being able to join together and have their day in court.
Cordray also argued that Trump was being misled by advisers who claimed that arbitration was a better, faster option for consumers than class action litigation.
The embattled CFPB director said that his bureau’s rule was intended to give consumers a chance to fight back when they are wronged, and that the industry was attempting to hide this fact.
“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,” Cordray said.
Those arguments were not sufficient to persuade Trump.
Cordray said in a Thursday statement that the president “signed away consumers’ rights to their day in court.”
“This action tips the scales of justice in favor of Wall Street banks less than ten years after they caused the financial crisis,” Cordray said.
The CFPB director vowed that his agency would stay aggressive in policing consumer financial markets.
“Now more than ever, it is critical that the Consumer Bureau remain a strong check on financial companies. Consumers who believe they have been wronged should contact us with their complaints,” he said.
Industry representatives cheered the president’s move to kill the arbitration rule.
“The CFPB’s rule was never about protecting consumers; rather, it was about protecting trial lawyers and their wallets. The CFPB’s own study backs that up and proves trial lawyers would have been the real winners had this rule gone into effect,” Richard Hunt, the president and CEO of the Consumer Bankers Association, said in a statement.
The above was first reported by Law360.