CFPB arbitration rule under Congressional review

State and metro auto dealer associations, the U.S. Chamber of Commerce and other business groups are busy fighting a rule on arbitration put in place by the Consumer Financial Protection Bureau (CFPB).
The CFPB rule, issued in July (see WANADA’s original coverage here), permits dealers to ask consumers, as part of a pre-dispute arbitration agreement, to waive their right to participate in a class action suit. The rules are different for lenders. Finance and lease providers under CFPB jurisdiction (as most are) must use a disclosure telling consumers who are subject to pre-dispute arbitration provisions that they have a right to participate in class action lawsuits.

But the disclosure must also include language saying that this right does not apply to motor vehicle dealers exempt from CFPB jurisdiction –in other words, franchised new-car dealers.

The dealer exemption is helpful, of course. But dealers still face indirect liability as a result of the master agreements they sign with finance and lease providers. Based on those agreements, dealers can still be held liable to indemnify finance and lease companies for alleged dealer wrongdoing leading to class action suits that consumers may bring against financial institutions.

But the rule may not become final. Several Republican Congressional leaders are unhappy with the CFPB rule. Under the Congressional Review Act, any agency rule can be overturned by a majority vote of Congress within 60 legislative days after the rule is published in the Federal Register. The House has already voted to overturn the rule, and a close vote is expected in the Senate.

The U.S. Chamber of Commerce has an ad campaign urging the Senate to overturn the rule. Auto dealer associations nationwide are monitoring the situation closely. WANADA will continue to provide updates in this Bulletin, so stay tuned…

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