President Signs into Law Joint Resolution Nullifying the CFPB’s Arbitration Rule

As you know, one of the most important components of RMA’s mission is to provide independent analysis and comment on matters pertaining to risk management and capital regulation.  One such regulation is the CFPB’s recently promulgated Arbitration Rule, which was the subject of an NPR in May 2016.  The primary purpose of the CFPB’s Arbitration Rule is to prohibit the use of a pre-dispute arbitration agreement to prevent a consumer from participating in certain class action lawsuits. Following the review of the CFPB’s study of the use of arbitration agreements, RMA submitted a detailed comment letter strongly objecting to the CFPB’s stated view that pre-dispute arbitration provisions which contain class action waivers are intended by financial institutions to “sidestep the legal system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm consumers.” 

RMA commented that the Arbitration Rule is not in the public interest and for the protection of consumers. In addition, RMA expressed significant concerns regarding both the intended and unintended consequences of the rule, namely that it would result in: (a) higher costs and longer periods for resolution of disputes, negatively impacting both institutions and consumers; (b) increased reputational risk for institutions; and (c) reduced access to products and services for consumers.

Not only has the industry expressed its legitimate concerns about the rule, but so have members of Congress and the prudential regulators.  I am pleased to inform you that this morning the President signed into law H.J. Res. 111, the Joint Resolution passed by the House and Senate, which nullifies the CFPB's Arbitration Rule. The Administration has stated that the CFPB’s rule “would benefit trial lawyers by increasing frivolous class-action lawsuits; harm consumers by denying them the full benefits and efficiencies of arbitration; and hurt financial institutions by increasing litigation expenses and compliance costs (particularly for community and mid-sized institutions).” 

RMA appreciates the opportunity to be of service to our members.

William F. Githens, 
President & CEO

                                                                                                                                

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