Chamber of Commerce v. CFPB

Case Updates

After a long and vigorous fight led by the Chamber, the anti-arbitration rule was rejected by Congress. Exercising its authority under the Congressional Review Act (CRA), the Senate joined the House in passing legislation to repeal the rule. After President Trump signed the legislation into law, eliminating the anti-arbitration rule for good, the Chamber dismissed its lawsuit.

The U.S. Chamber, along with a coalition, filed a lawsuit in the U.S. District Court for the Northern District of Texas challenging the legality of the Consumer Financial Protection Bureau’s (“CFPB”) new regulation banning pre-dispute arbitration agreements. As the complaint explains, the arbitration rule is both constitutionally infirm and inconsistent with the governing statutes, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the Administrative Procedure Act. Recognizing the legal problems that would result from retroactive application of an arbitration rule to pre-existing contracts—and that the tens of thousands of companies subject to an arbitration regulation imposed by the CFPB would need considerable time to decide upon new dispute resolution procedures and adapt their forms and procedures for entering into contracts—Congress provided that any arbitration regulation imposed by the CFPB could be applied only to new contracts entered into 180 or more days after the rule’s effective date. The Chamber seeks a preliminary injunction to stop the running of that 180-day period during the pendency of this litigation.

The U.S. Chamber of Commerce, American Bankers Association, American Financial Services Association, Consumer Bankers Association, Financial Services Roundtable, and a coalition of associations located throughout Texas filed a legal challenge to the Consumer Financial Protection Bureau’s (CFPB) anti-arbitration rule. The lawsuit was filed in the Northern District of Texas, Dallas Division.

As outlined in the complaint, the legal challenge rests on several grounds, including that the rule violates the requirements of the Dodd-Frank Act because the CFPB study was flawed and based on biased data, and because the rule is harmful to consumers.

The following is a joint statement from the five national association co-plaintiffs:

“For years, our organizations have tried to work with the CFPB to promote strong consumer protection while maintaining a functional arbitration system. The CFPB’s own study found that arbitration provides more benefits to consumers than class action lawsuits. Unfortunately, the CFPB chose to instead finalize a rule that will harm consumers and businesses by effectively banning arbitration and increasing speculative class action litigation. As Congress continues to consider action within its purview, we are filing this challenge to ensure all legal remedies are utilized to preserve arbitration for consumers. Ultimately, we hope this legal challenge will compel the CFPB to take this misguided rule back to the drawing board. If left unchecked, the CFPB’s rule will harm consumers and businesses alike while providing a financial windfall to the class action plaintiffs’ bar.”

Charles S. Kelley, Andrew J. Pincus, Archis A. Parasharami, and Kevin S. Ranlett of Mayer Brown LLP served as co-counsel for the plaintiffs.