In a major victory for community banks, the United States Senate voted Tuesday evening to overturn the Consumer Financial Protection Bureau’s (CFPB) controversial Arbitration Rule (Rule) which was set to take effect in March. The United States House of Representatives voted to rescind the Rule in July. Both votes in the House and Senate were generally along party lines with Republicans voting in favor and Democrats voting against the repeal.
The Rule would have prohibited financial institutions from including a clause in their agreements which would require consumers to use binding arbitration versus litigating their grievances in class-action lawsuits. Proponents of the repeal highlighted the more than one-hundred year tradition of arbitration, which is an alternate dispute resolution process that was cited as resolving differences more quickly and with greater financial gain to consumers. The Senate vote was deadlocked with 50 voting in favor and 50 voting against; so Vice President Mike Pence cast the deciding vote to repeal the Rule.
In July of 2017, the Community Bankers Association of Illinois (CBAI) joined with forty-one state banking trade associations in a letter to the Senate urging support for the repeal of the Arbitration Rule.The letter stated that “If the rule is allowed to stand, it will encourage the filing of frivolous class action lawsuits which have the potential to devastate community banks.” The letter concluded "With your support for S.J. Res. 47 [repeal of the Rule], arbitration will be preserved as a fair, and cost effective tool of dispute resolution. This is the best outcome for consumers, community banks, and the broader economy.” Read Joint Letter to the Senate.
October 25, 2017