WASHINGTON — Democratic senators are gearing up for a showdown with Republicans over a Consumer Financial Protection Bureau rule governing arbitration agreements in financial contracts.
The CFPB is expected to release a final rule this spring that would restrict the use of mandatory arbitration clauses, but Republicans are prepared to use a legislative process called the Congressional Review Act to roll back the regulation when it is released.
The GOP has already used the law, which allows Congress to object to a new regulation within 60 legislative days of its release, to repeal a number of rules finalized in the waning days of the Obama administration.
But Democrats are preparing their own bill targeting arbitration requirements. Rep. Brad Sherman, D-Calif., Sen. Sherrod Brown, D-Ohio, reintroduced a bill that would work in concert with the CFPB rule to help Wells Fargo customers who were victims of bogus accounts opened by former employees.
“This is a narrow bill and it is going to be hard to explain why once again Republicans won’t even give us a hearing on this bill, because it pits ordinary Americans against Wall Street," Sherman said during a press conference Tuesday.
The bill would retroactively apply the CFPB rule to victims of Wells Fargo, allowing them to sue the company.
Sen. Al Franken, D-Minn., who led the press conference, introduced a separate piece of legislation that would ban mandatory arbitration agreements. He added that the “CFPB looked at mandatory arbitration and the abuse of it and made some regulations to protect consumers.”
Since the scandal came to light last fall, Wells Fargo has taken a number of steps, including remediating affected employees and ousting John Stumpf, its chief executive.
But Sherman said that does not go far enough to help customers whose credit scores have been docked because they were unaware of accounts that were illegally opened in their name.
“The harm is not just fees imposed on a card or on the account,” said Sherman, while acknowledging Aaron Brodie, a victim of the scandal who was in the audience and is suing Wells Fargo.
If and when the CFPB releases the final rule, Republicans will likely object and attempt to block it, pointing to some of the bureau’s own findings that consumers are often better compensated through arbitration agreements.
Democrats, however, will frame the debate as Republicans' picking corporations over consumers.
“We do not have a Republican co-sponsor and I think it will be difficult for the Republican Party to say why they side with Wall Street over ordinary crime victims,” Sherman said.