by Jeff Sovern
Here's what David Lazurus says in his LA Times column, Banks and credit card companies can't try to stop you from joining a class action lawsuit — for now:
Consumer advocates — who for months have been gearing up for this fight — tell me they have little doubt the House will swiftly use the Congressional Review Act to undermine the CFPB’s arbitration rule. Then the matter goes to the Senate, and that’s where advocates hope they can mount their defense.
I’m hearing that all roads lead to Sen. Lindsey Graham (R-S.C.), who introduced a bill in 2015 aimed at giving military service members the right to opt out of mandatory arbitration and have their day in court if they believe they were treated unfairly in foreclosure proceedings or other issues involving repossession of property.
I called and emailed Graham’s office Monday. No one responded.
My hunch is that Graham and other Republicans who may be waffling on healthcare won’t also pick a fight on arbitration. They may feel that crushing the CFPB’s new rule will help Senate Leader Mitch McConnell save face after the bruising healthcare battle.
Evan Weinberger has CFPB Bets Congress Will Let Arbitration Rule Slip By in Law360, in which he wrote:
[T]he breadth of industry opposition to the rule will make it harder for Congress to skip over the bureau’s move against arbitration, said Joseph T. Lynyak, a partner with Dorsey & Whitney LLP.
“There seems to be such an imperative, and a coalition being created, to get this thing killed,” he said.
Industry groups including the Chamber and the American Bankers Association have already called on Congress to use the CRA to eliminate the rule.
Emily Stewart's reports in CFPB Class-Action Rule Already in Limbo as Senator Moves to Challenge in The Street that Senator Cotton has started the process of invoking the CRA as to the rule. Here is more from her:
"[W]e remain dubious that Congress will permit the rule to take effect," said Cowen analyst Jaret Seiberg in a note on Monday after the rule was announced, adding that he expects Congress to use the CRA to void the arbitration rule.
Congress in May failed to roll back a separate rule by the CFPB intended to make prepaid payment cards more affordable and transparent. Compass Point analyst Isaac Boltansky said in a note the effort to reverse the arbitration rule is "far better positioned politically" than the prepaid rule, but the fate of the rule will "be determined by public perception" in the weeks to come.
"If the rule is tagged as an eleventh-hour policy aimed at padding the pockets of trial attorneys and setting the stage for an end to arbitration all together, then the odds will be modestly in favor of reversal," he said. If the rule is successfully framed as a valiant defense of consumer rights against Wall Street greed, then the odds will be against reversal."
Boltansky gives the CFPB's arbitration rule slightly less than a 50% chance of being reversed via the CRA.
Kate Berry and Ian McKendry have written Fight over CFPB arbitration rule may just be starting in the American Banker. Here's some of what they have to say:
"I believe it will be all hands on deck to do a CRA resolution on this rule," said Richard Hunt, president and CEO of the Consumer Bankers Association.
House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, quickly threw his support behind a rollback of the rule. "As a matter of principle, policy, and process, this anti-consumer rule should be thoroughly rejected by Congress under the Congressional Review Act," said Hensarling.
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Acting Comptroller of the Currency Keith Noreika also sent a letter to Cordray earlier in the day raising questions about the rule's impact on financial stability. * * *
But Eric Goldberg, a CFPB senior counsel, said the CFPB consulted with the Treasury Department and other prudential regulators before issuing the rule.
And on a related topic, Adam Levitin has an excellent discussion about the likelihood that the FSOC will block the rule at Credit Slips.