In October 2017, the United States Senate voted to invalidate a rule promulgated by the Consumer Financial Protection Bureau (“CFPB”), which would have prohibited financial institutions from using arbitration agreements in which the consumer waives the right to participate in a class action. The rule—which was announced by the CFPB in July 2017 and was not yet in effect at the time it was invalidated—prohibited class action waivers imbedded in consumer arbitration agreements (the “Arbitration Rule”). If the Arbitration Rule had gone into effect, financial institutions and other companies offering consumer products would have been blocked from requiring that consumers resolve their disputes on an individual, non-class basis in arbitration.
On October 24, 2017, Vice President Pence broke a 50-50 Senate tie, voting to invalidate the CFPB Arbitration Rule. The vote thus set in motion the full repeal of the Arbitration Rule, and, on November 1, 2017, President Trump signed a joint resolution passed by Congress finalizing the repeal. The CFPB has since published a notice removing the Arbitration Rule from the Code of Federal Regulations.
The action taken by Congress is reflective of the ongoing efforts by the Trump Administration and Congress to curtail the power and impact of the once-powerful CFPB. In November 2017, Richard Cordray resigned as director of the CFPB and named his deputy director, Leandra English, as his interim replacement. Shortly after Cordray’s announcement, President Trump nominated his Office of Management and Budget Director, Mick Mulvaney, to replace Cordray as interim director. This sequence of events has set in motion a legal showdown over the authority of the president to name the replacement for CFPB director. Thus far, the Trump Administration has been successful in court defending its decision. The United States Court of Appeals for the District of Columbia recently granted English’s request for an expedited review of the case, following the denial of English’s request to preliminarily enjoin Mulvaney from replacing English as interim director.
Last week, Mulvaney distributed an internal memo to the CFPB staff in which he pledged to curtail the agency’s aggressive regulatory enforcement practices. Mulvaney wrote that: “[The] CFPB has a new ‘mission’: we will exercise, with humility and prudence, the almost unparalleled power given to us to faithfully enforce the law in furtherance of the mandate given to us by Congress. But we go no further. Simply put, the days of aggressively ‘pushing the envelope’ of the law in the name of the ‘mission’ are over.”
The collective action of the Trump Administration and Congress reflects continuing efforts to overhaul the agency. These efforts likely come as welcome news to consumer financial service providers, who have faced constant scrutiny and pressure from the CFPB since the days of the Obama Administration.
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