In a Legal Alert posted earlier this month, Kilpatrick Townsend’s Financial Institutions Team highlighted the key provisions of the Consumer Financial Protection Bureau’s Arbitration Agreements Final Rule, 82 Fed. Reg. 33210 (July 19, 2017) (the “Rule”). The full Alert is available here. Among other things, the Rule prohibits covered financial services providers from using pre-dispute arbitration agreements to block consumer class actions in court and requires most financial services providers to include language in their arbitration agreements reflecting this limitation.
Soon after the Rule’s issuance, the U.S. House of Representatives voted last week 231-190 to repeal it under the Congressional Review Act. H.R.J. Res. 111, 2017. The Congressional Review Act, 5 U.S.C. § 801, et seq., permits Congress to pass a joint resolution disapproving a regulatory enactment within 60 days of a promulgating agency providing notice of the enactment to Congress, and if the disapproval is signed by the President (or his veto is overridden), the regulation does not go into effect and the same or a substantially similar regulation cannot be enacted by the agency. 5 U.S.C. § 801(a)(3), (b). The House’s disapproval resolution will now go to the Senate for consideration, and if it passes, it is likely to be signed into law by the President. See Sylvan Lane, House votes to repeal consumer arbitration rule, The Hill, July 25, 2017, available at http://thehill.com/policy/finance/343652-house-votes-to-repeal-consumer-financial-protection-bureau-rule. It is unclear whether the resolution has the votes to pass the Senate. Even if the Senate does not pass the disapproval, it is possible that Congress will eventually enact a law overriding the Rule.
Key Takeaways: The future of class waivers in pre-dispute consumer financial services arbitration agreements remains uncertain. Financial services providers should carefully monitor developments and be sure to have an appropriate compliance plan.