As July in Washington ends with high drama and spectacular political drama, much of the day-to-day work occurred with little fanfare. Congress is working to overturn a rule finalized by the Consumer Financial Protection Bureau (CFPB) limiting the use of arbitration clauses in financial products. Concerns related to the cost associated with this limitation and the possibility of increased class action litigation prompted Congress to initiate a process known as the Congressional Review Act (CRA). The CRA provides an added check on the Administration allowing Congress to vitiate a rule-making with a majority vote in the House and the Senate. This process must occur on a short timeline and questions remain as to whether or not enough support exists to successfully block the CFPB Arbitration rule.
Meanwhile, the CFPB is staying busy preparing to finalize their small dollar lending rules. Aimed at those businesses engaged in short-term, high-interest loans, often called payday loans, the rule focuses on placing some restrictions on the marketing of these loans as well as the terms. The CFPB has expressed concerns about consumers entering a “cycle of debt” by taking out numerous small dollar, short term loans in order to stay afloat. These rules are based on the CFPB’s authority through the Unfair and Deceptive Practices Act (UDPA) with the agency claiming that the interest rates and the overall terms of these loans make them inherently unfair and deceptive. The prevailing rumor in DC is that the current director of the CFPB, Richard Cordray, plans to depart the agency in September and getting this rule finalized is an important goal for Cordray.
A number of nominations moved through the Senate Banking Committee in July and joined a backlog of nominees waiting for a confirmation vote before the full Senate. The confirmation vote is the last step in the process for these nominees, but due to partisan disagreements the Senate has not voted on a nominee since May and 84 nominees are awaiting action.