Late on October 24, 2017, the US Senate voted 50–50 (with Vice President Mike Pence breaking the tie) under the Congressional Review Act to “disapprove” the Consumer Finance Protection Bureau’s rule prohibiting arbitration clauses in consumer finance contracts that bar class actions, as well as various transparency obligations for otherwise permitted arbitration clauses. The U.S. House of Representatives had passed a “resolution of disapproval” on a 231–190 vote in July seeking to overturn the rule, and the Trump Administration has signaled its opposition to the rule For more information, see a recent Treasury Department report. Consequently, the Consumer Financial Protection Bureau (CFPB) arbitration rule will become inapplicable and the ongoing litigation seeking a judicial ruling to overturn the rule will become moot once President Trump signs the legislation.
The Congressional Review Act provides that a federal agency may not issue a new rule that is substantially the same as the disapproved rule unless Congress thereafter specifically authorizes the new rule:
(1) A rule shall not take effect (or continue), if the Congress enacts a joint resolution of disapproval, described under section 802, of the rule.
(2) A rule that does not take effect (or does not continue) under paragraph (1) may not be reissued in substantially the same form, and a new rule that is substantially the same as such a rule may not be issued, unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.
In light of this statutory restriction, the CFPB will face substantial barriers to adopting new regulations covering this subject matter. However, this statutory language has not been interpreted by any court. So, the extent of those barriers is unclear. The current director of the CFPB, Richard Cordray, is widely expected to leave his post soon to run for governor of Ohio. In any event, his tenure expires in 2018, and this administration will then be able to select a new director, likely to be less supportive of consumer class actions and other aspects of controversial consumer protection measures.