House Republicans moved Tuesday to rein in the Consumer Financial Protection Bureau, approving a legislative veto of a new rule that would have made it easier for people to join class-action lawsuits.
The 231-190 vote, which mostly followed party lines, marks the first time Congress has used its regulation review powers on a rule issued under President Trump, and if it clears the Senate, it’ll be the first time lawmakers have successfully challenged a sitting administration.
The CFPB — the centerpiece of Democrats’ 2010 Wall Street reform law — issued a new rule earlier this month that would prevent banks and financial institutions from inserting “mandatory arbitration” language into consumer contracts.
Businesses use mandatory arbitration to prevent people from joining together later to sue over purported violations or abuses. But Republicans said they fear excessive litigation and frivolous lawsuits would result, and they moved to overturn the rule using the Congressional Review Act.
“We all want fair outcomes for consumers, but the CFPB’s unfair, deceptive and abusive rule will deprive millions of Americans of a convenient, fast and effective way to resolve their disputes,” said Rep. Keith J. Rothfus, Pennsylvania Republican and the measure’s sponsor.
The GOP also said the ultimate beneficiaries of the rule are likely to be trial lawyers who would presumably get more time in the courtroom to hash out disputes.
Proponents of the rule, however, say companies are closing down valid avenues for justice by trying to steer away from class-action lawsuits.
“Forced arbitration gives financial services providers a free pass to get away with abuse,” said House Minority leader Nancy Pelosi, California Democrat. “It sadly reflects a Republican Party that works relentlessly to empower Wall Street and rig the system against consumers.”
The CFPB has been a target of the GOP for years.
Republicans say the bureau and, notably, its director, Richard Cordray, shouldn’t be given such vast powers to levy penalties on the consumer lending industry. Democrats argue the bureau is working as intended and has returned billions of dollars to consumers through its enforcement actions.
The measure now must clear the Senate, where, under the rules of the Congressional Review Act, it can pass with a majority vote. The CRA allows Congress to undo rules that have been issued within the previous 60 legislative days and forbids agencies from issuing the rules again.
On Tuesday House Speaker Paul D. Ryan’s office touted that the current Congress has used the CRA 14 times to turn back rules passed under then-President Obama, and said House Republicans were working to change an “out of control” CFPB.
“Even with a new administration, the CFPB has been up to no good,” Mr. Ryan’s office said, also pointing out that the White House appears supportive of the legislation.
The arbitration rule was published earlier this month, though the regulatory process had kicked off under Mr. Obama.
Mr. Obama vetoed a handful of CRA resolutions that got through a Republican Congress — a prospect that appears unlikely to happen if the Senate approves its own “resolution of disapproval” of the rule.
Before this year, the CRA had been successfully used only once, in 2001, to overturn a Clinton-era rule on ergonomic standards.