The U.S. Congress could act within weeks to kill a new rule that bars financial companies from blocking consumers who wish to file class-action lawsuits, according to a key Republican senator.
Senator Tom Cotton, a member of the Senate Banking Committee writing legislation to tackle the rule, said Wednesday he was optimistic that Congress could pass a resolution revoking the new regulation authored by the Consumer Financial Protection Bureau (CFPB) within weeks.
“I’m going to do all I can to repeal this regulation in the next three weeks of this congressional session,” he said at an event hosted by the U.S. Chamber of Commerce.
Cotton is drafting legislation that would repeal the CFPB’s new ban on mandatory arbitration clauses often found in financial contracts. Under the Congressional Review Act, Congress can pass legislation repealing any new regulations with a simple majority.
Mandatory arbitration clauses, found across a range of financial contracts, require consumers to resolve any disputes through arbitration instead of joining together in class-action lawsuits.
Consumer advocates have hailed the CFPB rulemaking, arguing that the fine print frequently found in financial contracts unfairly bars consumers from seeking that option.
If Republican majorities in the House and Senate rally around the bill, they would be able to eliminate the new rule, which the CFPB formally finalized on Tuesday.
Cotton said he was working with Senate Banking Committee Chairman Mike Crapo on the bill, and was optimistic it would garner broad support.
He went so far as to predict “half a dozen or so” Democrats in the Senate could join Republicans in eliminating the rule, although Democrats are generally supportive of the CFPB’s regulatory work and no Democratic senator has publicly criticized the rule.
The House is expected to move first on a repeal bill, passing a measure next week, according to Cotton.
Republican efforts to repeal the regulation via legislation is one of several fronts in an attack on the CFPB initiative.
Other financial regulators could consider challenging the rule, and business groups have indicated a legal challenge is on the way as well.
“The agency has shirked its obligation to properly study the arbitration issue, as it was mandated by Congress,” said Lisa Rickard, president of the Chamber of Commerce’s Institute for Legal Reform. “The courts will have their say.”
(Editing by Jeffrey Benkoe)