By a vote of 236-181, the House of Representatives rejected an amendment offered by two Democratic Congressman to H.R. 5485, the Financial Services and General Government Appropriations Act, which covers appropriations for the fiscal year ending September 30, 2017. (The bill was approved by the full House last month by a vote of 239-185.) The amendment would have removed a provision in the bill establishing new requirements the CFPB would have to follow before it could finalize an arbitration rule. The American Bankers Association had urged House members to reject the amendment.
In addition to various provisions intended to curb the CFPB’s authority, the bill includes a provision that states none of the CFPB’s funding “may be used to regulate pre-dispute arbitration agreements…and any regulation finalized by the Bureau to regulate pre-dispute arbitration agreements shall have no legal force or effect until the requirements regarding pre-dispute arbitration specified in the report accompanying [the bill] under the heading “Bureau of Consumer Financial Protection” are fulfilled.” On May 5, 2016, the CFPB issued a proposed rule that would prohibit covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action with respect to the covered consumer financial product or service. The proposed rule would also require a covered provider that is involved in an individual arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the CFPB.
The “requirements regarding pre-dispute arbitration specified in the report accompanying [the bill]” include requirements related to a further study that must be conducted by the CFPB. They also include a requirement for the CFPB to consider the costs and benefits to consumers in determining whether any final rule regulating pre-dispute arbitration rule is in the public interest and for the protection of consumers.
Such costs and benefits must include: (1) the practical effect on consumers’ access to low cost, fair, and efficient means of resolving claims for the types of injuries that consumers most often incur and that are less likely to be the subject of government enforcement actions; (2) the extent to which private class action proceedings on behalf of consumers regarding consumer financial products and services provide net benefits to consumers in light of the CFPB’s and other regulators’ enforcement and examination authority; (3) the practical effect of any regulation on the availability of pre-dispute arbitration; and (4) the impact of any regulation on the cost and availability of credit to consumers and small business. The CFPB must find that the demonstrable benefits of any rule to consumers outweigh the costs to consumers, taking into account the foregoing factors and other relevant factors, and that the rule subjects pre-dispute arbitration to no more regulation than is necessary to serve the public interest and protect consumers.