House and Senate lawmakers formally filed resolutions on Thursday to repeal the Consumer Financial Protection Bureau's arbitration rule, but there were early signs that enacting them may prove challenging.
Under the Congressional Review Act, lawmakers require just a simple majority in both chambers to overturn an agency's rule within 60 legislative days of its publication in the Federal Register. While that process is expected to be relatively straightforward in the House, the Senate remains a question mark.
Senate Republicans can afford to lose just two senators in their push to scrap the CFPB rule, which would ban mandatory arbitration agreements in financial contracts. But Sen. John McCain's announcement late Wednesday that he's been diagnosed with brain cancer may leave the GOP with an even narrower margin if the Arizona Republican does not return to the Senate by the time the 60-day window expires.
“We haven’t done a count and with the margins we have, every vote is tough,” Banking Committee Chairman Mike Crapo, R-Idaho, told reporters Thursday. “I certainly hope that we have a very solid vote."
But there were already signs that at least some Republicans appear reluctant to sign on immediately. The Senate's resolution was introduced by Crapo and supported by every GOP member of the Banking Committee except one, Sen. John Kennedy, R-La. It's not clear if Kennedy opposes the resolution. A staffer for the senator said he was still reviewing it.
Overall, 24 senators, all Republicans, are co-sponsors of the resolution. It's uncertain if Republican moderates, including Sen. Susan Collins of Maine and Lisa Murkowski of Alaska, are supportive of the measure.
Sen. Mike Rounds, R-S.D., who co-sponsored the legislation, acknowledged in a brief interview Thursday that Republicans can't afford any defectors. But he is hopeful it will still pass.
"The critical issue is this is an opportunity," he said. "We have been able to do 14 of these so far this year. I think we are moving in the right direction because we are utilizing [the Congressional Review Act] the way it was supposed to be utilized in the first place.”
Some Republicans are also clearly hoping that a few Democrats might join the effort. Sen. Tom Cotton, R-Ark., another co-sponsor, said Wednesday that there is "no reason ... this can't be a bipartisan effort."
But so far, there are no signs of defections among Democrats. Sen. Catherine Cortez-Masto, D-Nev., also said she will vote against the resolution.
“I can’t speak for my colleagues, but I can tell you where I am as a former attorney general," she said. "I support the CFPB’s ruling and I would oppose any limitation of consumers' access to our courts."
Sen. Elizabeth Warren, D-Mass., highlighted the Wells Fargo phony-accounts scandal as a reason to support the CFPB rule.
“Wells Fargo right now is using these arbitration clauses to claim that people whose names were used to open fake accounts cannot sue Wells Fargo because in the one true account they had ... there is a hidden arbitration clause," she told reporters. "Wells Fargo is trying to use arbitration clauses to hide out from responsibility for opening fake accounts for millions of people in this country."
Warren added that “now is the time to see whose side people are going to be on."
"Are they going to be on the side of the industry that uses hidden arbitration clauses to cheat people, or are they going to be on the side of millions of consumers, of veterans groups, faith groups, civil rights groups who say when we get cheated, we want to have a chance to have some accountability,” she said.
The Senate also faces a tight legislative calendar. Republicans are still struggling to pass health care reform, an issue that has divided the caucus, and must deal with budget issues and raising the debt ceiling before the fall. That leaves them with little time to take up the resolution on the CFPB's arbitration rule.
The resolution's fate in the House is much clearer, however. Rep. Keith Rothfus, R-Pa., introduced the resolution on Thursday, and it is likely to have more than enough support from Republicans to clear in that chamber.
Financial Services Committee Chairman Jeb Hensarling, R-Tex., called the arbitration rule "anti-consumer."
“In the last election, the American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives," Hensarling said in a press release. "I can think of no better example of such bureaucrats than those at the CFPB. This CRA is a critical step towards fulfilling our promise to the American people and truly protecting consumers.”
The CFPB arbitration rule would make it easier for consumers to file class-action lawsuits by prohibiting mandatory arbitration agreements that are often embedded in financial contracts. But the bureau’s own study found that consumer disputes are often resolved faster and provide more compensation to consumers.
Republicans have often cited the CFPB's study, which found consumers received an average of $32 from class-action litigation, compared with $5,389 in arbitration. Consumer advocates have said that those statistics, while accurate, reflect the small number of arbitration cases and that consumers tend to arbitrate over larger amounts.
A key bone of contention in the dispute over arbitration is that Republicans see the rule as a giveaway to trial lawyers, who they claim file frivolous lawsuits against financial firms.
