Efforts to repeat the Consumer Financial Protection Bureau’s new rule on arbitration were handed a setback by Wells Fargo’s revelation that the company had wrongfully forced auto loan customers to pay for auto insurance.
The Republican-controlled House of Representatives passed a resolution last week to reverse the CFPB’s rule, which would limit lenders’ ability to include arbitration clauses in loan contracts. Instead, the rule would virtually force the lenders to open themselves up to costly and lengthy class-action lawsuits. In order for the reversal to become final, the resolution would also have to pass in the Senate and then be signed by President Trump. While the President’s signature seems a certainty, passage in the Senate is much less certain.
The complication to the resolution passing in the Senate arises because a number of Wells Fargo’s auto loan contracts contain arbitration clauses. Analysts have already started weighing in regarding the resolution’s chances in the Senate. At present, the odds are slightly against passage. According to one, “A CRA reversal is still possible, but it is no longer probable.”
Democrats certainly sensed an opportunity and have immediately used the news about the Wells Fargo scandal as political fuel. “The only thing more outrageous than the fact that Wells Fargo is continuing to cheat its customers is the fact that this administration wants to roll back Dodd-Frank rules,” said Sen. Sherrod Brown, D-Ohio.
Sen. Elizabeth Warren (D-Mass.) even stepped up the rhetoric in a letter to Federal Reserve Board Chair Janet Yellen, asking her to remove all 12 Wells Fargo board members.
While political will among Republicans seems to support overturning the CFPB’s rule, a number of Republican Senators seems to be on the fence. The GOP has struggled in its efforts to pass health care reform and has been delayed on tax reform. It might even be difficult to place the CFPB rule on the legislative calendar. Even if it comes to a vote, some Republican senators wary of too much political fallout may shy away from overturning the CFPB’s rule.
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