The new rule limits the ability of consumers to sue financial companies. This should be read in the context of the Trump Administration trying to repeal the Dodd–Frank Wall Street Reform and Consumer Protection Act.
A rule that was years in the making, intended to restore the ability of consumers to sue financial companies as a group, is set to be unravel in the coming months, despite the heads of two federal agencies clashing over it and critics gearing up for battle.
The rules governing “mandatory arbitration” from the Consumer Financial Protection Bureau’ is set to be published in the Federal Register, which essentially is a directory of regulatory actions. Once it is listed there it will start the timer for two possible ways of undoing it.
The rule bans companies from requiring customers to sign agreements, when opening new accounts, that state they will not join a group lawsuit, or class action, in the event of a dispute.
According to critics, class action lawsuit mostly benefit lawyers. Moreover arbitration is a far quicker as a process, and is a cost-effective alternative to long drawn court proceedings.
Once the rule is published, anyone sitting on the council of the country’s top financial regulators can petition for a stay within 10 days, by showing that the rule significantly risks endangers the existing banking systems.
Already, Keith Noreika, the Acting Comptroller of the Currency, has taken steps to thwart the rule, after the release of the rule’s final draft, last week.
The rule can also be nullified under the Congressional Review Act, under which Congress could take up to six months to consider the resolution.
Powerful Senate Republicans, including Banking Committee Chairman Mike Crapo, are drafting a resolution to kill the rule.
The U.S. Chamber of Commerce is also currently evaluating its options, which includes litigation, and has yet to decide on its response, said a spokeswoman for the lobbying group.
A response could come as soon as Wednesday, when it is scheduled to hold an event on arbitration.