Yesterday, the United States Chamber of Commerce and a coalition of corporate business lobbying groups filed a lawsuit in the Northern District of Texas seeking to enjoin the Consumer Financial Protection Bureau (“CFPB”) from enforcing a new rule that prohibits most financial service providers from requiring consumers to sign mandatory arbitration agreements that bar class-action lawsuits. In a complaint for declaratory and injunctive relief, the plaintiffs argue the new arbitration rule is invalid and must be set aside. According to the business groups:
…First, the Rule is the product of, and is fatally infected by, the unconstitutional structure that Congress gave the CFPB when it created the Bureau in the Dodd-Frank Wall Street Reform And Consumer Protection Act (“the Dodd-Frank Act”). Second, the Rule violates the Administrative Procedure Act (“APA”) because the CFPB failed to observe procedures required by law when it adopted the conclusions of a deeply flawed study that improperly limited public participation, applied defective methodologies, misapprehended the relevant data, and failed to address key considerations. Third, the Rule also violates the APA for the related reason that it runs counter to the record before the Bureau and fails to take account of important aspects of the problem it purports to address, making it the very model of arbitrary and capricious agency action. And fourth, the Rule violates the Dodd-Frank Act because it fails to advance either the public interest or consumer welfare: it precludes the use of a dispute resolution mechanism that generally benefits consumers (i.e., arbitration) in favor of one that typically does not (i.e., class-action litigation).
Unless the Dallas federal court provides the plaintiffs’ requested relief or federal lawmakers choose to act on the issue, the new CFPB arbitration rule is set to become effective on October 18th.
H/T to Mark Kantor for alerting us to the lawsuit.
Photo credit: Foter.com