Despite CFPB Director Richard Cordray’s fanfare in announcing the rule for the alleged protection of consumers (even though the CFPB’s own study revealed that it is class action plaintiffs’ lawyers who make windfalls on fees in class actions with class members getting little of the final ante), I’m betting the rule will never take effect.
First, the Congressional Review Act (“CRA”) gives the Congress an expedited procedure for a simple majority with no filibustering to overturn any federal administrative agency rule or regulation for a period of 60 in-session days. Once signed by the President, the rule is repealed and the agency cannot enact anything similar.
Congressional legislation to reign in the CFPB has also been active independently on Capitol Hill. Representative Hensarling’s bill would fund the CFPB through the Congressional appropriations process, and eliminate its UDAAP and supervisory authority, among other restrictions. To add a clause negating the arbitration rule would seem a fairly simple matter.
Even if Congress doesn’t act, the American Banker reported the U.S. Chamber of Commerce will sue the CFPB on the arbitration rule 241 days after Federal Register publication. They have a number of compelling legal and Constitutional arguments that likely would result in a judge granting a preliminary injunction against the rule while the Court sorts it out. Cordray’s tenure as CFPB Director expires three months thereafter and his successor nominated by President Trump could be expected to revoke the rule even while the preliminary injunction lawsuit was pending.
Already, auto industry and consumer finance lobbying groups have indicated they will lobby their Congress people to use the CRA or enact other legislation to undo the arbitration rule. They too could bring or join lawsuits against it that could delay its effect until after Cordray leaves. I think the likelihood of the rule surviving Corday are not very high.
So you have multiple constituents, a favorable Congress, and a number of avenues to seek a repeal or overturn the arbitration rule. There is no need for panic. A call to your House and Senate representatives and trade association activity yes. If we are diligent in opposition, it is very unlikely that this rule—arguably Cordray’s last ditch effort to get at auto dealers—will ever see the light of day.