With President Trump’s pen poised to seal the fate of the Consumer Financial Protection Bureau’s rule banning mandatory arbitration clauses in contracts for financial products and services, Director Richard Cordray made a bold, last-minute gambit: a direct plea for clemency.
On Oct. 25, the Senate voted to eliminate the embattled rule. Vice President Mike Pence broke what was a 50-50 split, largely along party lines. Only two Republicans voted against the repeal, South Carolina’s Lindsey Graham and John Kennedy of Louisiana. The House of Representatives had already voted in favor of the repeal earlier this year.
The CFPB’s rule, enacted in July, restored consumers’ right to file or join group lawsuits. Companies can still include arbitration clauses in their contracts, but may not use arbitration clauses to stop consumers from being part of a group action. The rule included specific language that companies will need to use if they include an arbitration clause in a new contract.
The rule almost immediately faced talk of a repeal under the Congressional Review Act. That legal mechanism provides a 60-day period following agency publication of a regulation during which an expedited Senate or bicameral vote can halt implementation.
As of Oct. 31, the bill authorizing the rule’s repeal, H.J. Res. 111, was awaiting the signature of President Trump to become law.
That action appears to be a mere formality given a statement issued by the White House. “The evidence is clear that the CFPB's rule would neither protect consumers nor serve the public interest,” it said. “Rather, under the rule, consumers would have fewer options for quickly and efficiently resolving financial disputes. Further, the rule would harm our community banks and credit unions by opening the door to frivolous lawsuits by special interest trial lawyers.”
“By repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefited the most from the CFPB's uninformed and ineffective policy,” the statement added.
Undaunted, and with the political equivalent of a Hail Mary pass, Cordray wrote a letter to the President [who, apparently, he has ever met or spoken to], pleading with him to spare the rule’s death sentence.
The letter, in its entirety, reads:
“As I am sure you know, last week the Senate voted to disapprove a rule that the consumer bureau had issued to enable consumers to act together by going to court when they feel they have been wronged. The resolution is now before you to decide whether it will stand or fall. This letter is not about charts or graphs or studies. Instead, it is simply a personal appeal to you, asking you to uphold this rule.
“Many have told me I am wasting my time writing this letter – that your mind is made up and that your advisors have already made their intentions clear. But this rule is all about protecting people who simply want to be able to take action together to right the wrongs done to them. When people are wronged or cheated, they deserve the chance to pursue their legal rights.
“You and I have never met or spoken, but I am aware that over the course of your long career in business you often found it necessary to go to court when you thought you were treated unfairly. Of course, most Americans cannot afford to do so on their own, so they have to band together to be able to fight companies like Wells Fargo, that opened millions of fake accounts, or Equifax, when it allowed sensitive data to be breached for more than 145 million Americans.
“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. “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.
“You alone now have the power to safeguard people’s ability to take action together and go to court when they are wronged. They deserve to have that right protected. I urge you to heed the views of the American Legion, the Military Coalition, and millions of Americans by vetoing this congressional resolution disapproving the arbitration rule. Thank you for your consideration.”