WASHINGTON – A Republican-backed effort to overturn a rule making it easier for consumers to sue banks has hit a snag: the Senate.
Continue Reading Below
At issue is a Consumer Financial Protection Bureau rule approved in July barring fine-print requirements that consumers use arbitration to resolve disputes over financial services. The rule makes it easier for consumers to join class-action lawsuits against banks and credit-card companies. Though fiercely fought by the financial industry, it is set to go into effect in March.
CFPB Director Richard Cordray, an Obama-administration appointee, pressed ahead with the rule despite opposition from Trump administration banking officials and Congress.
Republican lawmakers are targeting the CFPB rule with a legislative tool known as the Congressional Review Act. It allows lawmakers to overturn a newly issued regulation on an expedited schedule with a simple majority vote in Congress. The House voted 231-190 to overturn the rule in July. The Senate plans to act in September when it returns from a long recess.
However, support in the Senate is uncertain. No Democrats are likely to back the effort, and Republicans, with their slim majority, can't afford to lose more than two GOP votes. Several Republican senators have expressed reservations about voting to overturn the regulation, worried they may be portrayed as siding with banks and against consumers.
Analysts with Compass Point Research & Trading LLC and Keefe, Bruyette & Woods have put the odds of the rule remaining in place at over 50%.
Continue Reading Below
Sen. Lindsey Graham (R., S.C.) in an interview said he opposed the resolution, saying arbitration is "a windfall for the companies in terms of how you settle their cheating."
"You've had banks and credit-card companies nickel-and-diming consumers, and one of the things that makes them think twice is the idea of a massive lawsuit," Mr. Graham said. "Nobody is going to get a lawyer over a $10 overcharge, but when you overcharge millions of people $10, the bank or the credit-card company makes out like a bandit" in arbitration.
Other Republicans, including Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and John Kennedy of Louisiana, have said they are undecided. And Sen. John McCain (R., Ariz.) may be unavailable to vote as he undergoes treatment for brain cancer. In a recent close vote, Sens. Collins, Murkowski and McCain voted against a slimmed-down repeal of the Affordable Care Act, defeating the Republican party's effort to fulfill its promise to voters to overhaul the health law.
The stakes are high for Republicans. If they can't overturn the arbitration rule, it could energize the CFPB to complete additional regulations opposed by Republicans, such as payday-loan restrictions. That would prove a remarkable turnabout for an agency Republicans have promised to weaken but have been unable to do so despite controlling the legislative and executive branches of government. Earlier this year, Congress was unable to garner sufficient support to kill a CFPB measure affecting prepaid cards.
Backers of the effort to repeal the CFPB rule have said they are making headway in their efforts to kill the rule. "We're making good progress," Senate Banking Committee Chairman Mike Crapo (R., Idaho), who drafted the Senate version of the legislation, said in an interview.
Opponents of the rule generally say arbitration is faster and less expensive for consumers than a lawsuit. Supporters say requiring arbitration limits legal protections for consumers against corporate greed.
Most Republicans remain opposed to the arbitration rule. The GOP staff of the House Financial Services Committee on Friday recommended the panel file a contempt case against Mr. Cordray, saying the CFPB director defied the committee's subpoena for documents related to the arbitration rule.
A CFPB spokesman said the agency has worked "diligently" to comply with the committee's oversight and has produced "thousands of pages of documents thus far" related to the rule.
Ms. Murkowski, in an interview, said she has yet to determine which way she would vote and is discussing the issue with financial firms in her home state. "We're doing our due diligence right now," she said.
A spokeswoman for Mr. Kennedy said he is reviewing the bill.
A spokeswoman for Ms. Collins said the Maine lawmaker is undecided. Ms. Collins told the publication Morning Consult that while she is on the fence about the rule, she believes arbitration has served consumers well.
--Yuka Hayashi contributed to this article.
Write to Andrew Ackerman at firstname.lastname@example.org
(END) Dow Jones Newswires
August 06, 2017 08:14 ET (12:14 GMT)