WASHINGTON — Facing a 60-day deadline and a looming summer congressional recess, Sen. Tom Cotton of Arkansas vowed Wednesday that he and his fellow Republicans have enough time to overturn a rule that allows consumers to band together and sue financial institutions.
Cotton said he would begin next week to take steps that would repeal a Consumer Financial Protection Bureau’s arbitration rule.
CFPB, which was created under Dodd-Frank during former President Barack Obama’s first term of office, finalized a rule last week to regulate mandatory arbitration agreements in contracts for financial products, such as credit cards. Consumers can, under this rule, band together to file lawsuits against financial institutions, including banks and credit card companies.
“If you look at the evidence, arbitration is good for the real little guy,” Cotton said. Arbitration is not only faster but resulting in bigger rewards to consumers than class-action lawsuits, he said, citing a 2015 study by the CFPB.
Cotton said he will work hard to block the regulation, which he opposes along with the overall structure of the protection bureau, created during the Obama administration. Under government rules, he has 60 days to accomplish the repeal process, as the regulation was published in the Federal Register on Wednesday.
Cotton is drafting legislation that seeks to repeal the rule under Congressional Review Act. A simple majority of lawmakers in both the House and Senate are needed to nullify the rule.
“I’m starting now,” Cotton said in a speech in the U.S. Chamber of Commerce. “I’m going do all I can do to repeal this regulation in the next three weeks before the congressional recess, and when we return in September, I’m going to continue to fight to reform the CFPB.”
Consumer advocate groups supported the CFPB rule, because it restored choices for consumers to pursue a group claim without barring them from voluntarily resolving a dispute through arbitration.
“The rule will help to combat the culture of companies profiting from charging illegal fees and committing other crimes against their customers,” said Rohit Chopra, senior fellow at the Consumer Federation of America, an umbrella group for hundreds consumer groups, in a statement.
However, it may not be the case in the real world, said Andrew Pincus, a lawyer and a partner in Mayer Brown, a global law firm, during a panel discussion at the U.S. Chamber of Commerce after Cotton’s speech. He said CFPB’s arbitration rule would ultimately eliminate arbitration as an option and make it more expensive for customers to settle disputes.