WASHINGTON — The House voted 231 to 190 on Tuesday to pass a Congressional Review Act resolution to nullify the Consumer Financial Protection Bureau’s rule banning mandatory arbitration clauses, despite Democrats’ efforts to portray the move as a gift to big banks.
The outcome of the House vote was never in doubt, but the situation is murkier in the Senate, where more than two GOP defections could sink the effort.
Democrats were trying to do everything they could to prevent the resolution’s passage in the Senate, framing the issue as either a vote for the largest institutions or the American consumer.
“The Republicans are advancing this bill because they are on the side of the big financial institutions,” said Sen. Elizabeth Warren, D-Mass., the founder of the CFPB. “We are here on an emergency basis because the Republicans have seen the latest rule that has come out of the consumer agency and they are determined to act on behalf of the big financial institutions and get rid of this new regulation.”
Warren held a joint press conference earlier in the day with House Minority Leader Nancy Pelosi and Rep. Maxine Waters , the top Democrat on the House Financial Services Committee. All three Democratic leaders denounced the resolution, saying mandatory arbitration agreements help banks at the expense of their customers.
“If the banks and financial institutions know that the consumer can engage in a class-action suit, they might alter their behavior, but if they know the consumer is at the mercy of banks because of forced arbitration, the consumer doesn’t stand a chance,” Pelosi said. “It sadly reflects the Republican Party that works relentlessly to empower Wall Street and to rig the system against consumers.”
Rep. Keith Rothfus, R-Pa., introduced the House resolution to reject the rule, while Senate Banking Committee Chairman Mike Crapo, R-Idaho, is leading the effort in that chamber.
But it’s not yet clear if Crapo has the necessary 50 votes to prevail (with Vice President Mike Pence casting the tiebreaking vote). Sen. John Kennedy of Louisiana was the only Republican on the banking panel not to co-sponsor the bill.
There may be a few other Republican holdouts, including Sen. Lindsey Graham, R-S.C., who introduced a bill in 2015 that would allow service members to opt out of mandatory arbitration agreements.
Republicans may still be able to swing enough Republicans to pass the measure in the Senate, but they are hopeful at least a few Democrats will join the effort.
With top Democrats criticizing the Republican effort, however, many Democrats may view supporting the measure as politically dangerous.
Warren said it “never crossed” her mind that the Congressional Review Act could be used to reject the CFPB’s rule-writing. Despite analysis that shows the average consumer receives more financial compensation through the arbitration process, Warren and Waters said consumers could ultimately receive more if they are able to file class-action lawsuits.
“Consumers who are cheated by financial institutions and who are then forced into closed-door arbitration receive less compensation than they would have receive if they would have had the opportunity perhaps to have their day in court,” Waters said.
Warren also said arbitration can be an expensive process that most consumers wouldn’t pursue over a few hundred dollars or a bogus fee.
“If somebody cheats you for a few hundred dollars can you really afford to go to arbitration?” said Warren, who added that allowing several hundred or several thousand consumers to band together balances the scales against large financial institutions.
But Republicans remain optimistic.
In a statement following the resolution’s passage in the House, Rep. Blaine Luetkemeyer, R-Mo., said “Today, the House of Representatives took the first step in rolling back the anti-consumer regulation that is set to prompt more lawsuits across the country.”