Written By: Constantin Post
Associate Editor, American Journal of Trial Advocacy
On October 24th 2017, Vice President Pence cast a tie-breaking vote in the Senate. The Senate was deadlocked, 50-to-50. The Vice President was entitled to cast the final, fateful vote. With his vote, the final tally became 51-50. The legislation passed.
Senators were voting to repeal the Consumer Financial Protection Bureau’s proposed new rule, 12 CFR part 1040. This new rule would have restricted credit card companies and banks from inserting mandatory arbitration clauses into the fine print of financial contracts. Increasingly, credit card companies and banks have sought to introduce arbitration clauses in financial contracts with consumers. These clauses are often utilized as a method by which a company may entirely circumvent potential exposure to class-action lawsuits brought by consumers.
The Consumer Financial Protection Bureau had previously identified mandatory arbitration clauses as a threat to consumer’s ability to address predatory and deceptive business practices. Accordingly, the new rule was set to go into effect. However, on November 1st 2017, President Trump signed legislation, which overturned the Consumer Financial Protection Bureau’s new rule.
In July 2017, the Consumer Financial Protection Bureau issued its final proposed administrative rule addressing the regulation of contracts containing mandatory arbitration agreements: 12 CRF part 1040. The Consumer Financial Protection Bureau characterized the goals of this proposed rule as follows:
First, the final rule prohibits covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service. Second, the final rule requires covered providers that are involved in arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the Bureau and also to submit specified court records.
This new rule was based upon authority granted to the Consumer Financial Protection Bureau by Section 1028(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the Bureau in 2010. The financial industry met this new proposed rule with trepidation and vigorously argued against its implementation. Although the Supreme Court has repeatedly recognized that class action waiver provisions are fully enforceable, and that such provisions cannot be ignored simply because the cost of proceeding on an individual basis outweighs any potential recovery,  the Consumer Financial Protection Bureau sought a new rule to restrict these mandatory arbitration clauses.
In March 2015, the Consumer Financial Protection Bureau released a research study regarding mandatory arbitration clauses. The study found a vast disparity between the damages recovered by consumers via arbitration versus class-action litigation. Over a five-year period, 78 consumers sought relief via arbitration with a total aggregate recovery of $360,000. By contrast, over that same period, 350 million consumers sought relief via class-action litigation with a total aggregate recovery in excess of two billion dollars.
The effect of the implementation of proposed rule 12 CFR part 1040 will remain unknown. The Congressional Review Act provided Congress with the authority to override any proposed administrative rule promulgated by a federal agency. The Senate’s overriding of 12 CFR part 1040 effectively unwound the efforts of the Consumer Financial Protection Bureau to regulate the usage of mandatory arbitration clauses.
Critics may argue that the passage of this override has culminated in the elimination of a key consumer protection provision. By contrast, proponents may praise this legislation for removing the shackles from an, as proponents contend, over-regulated retail financial industry. Both groups may agree, however, that this change will have a watershed effect on both consumers and the financial industry, alike.
 Zachary Warmbrodt, Pence Breaks Tie in Senate Vote to Ax Arbitration Rule, 2017 Politico, Oct. 24, 2017 at (2017), https://www.politico.com/story/2017/10/24/consumer-protection-arbitration-senate-pence-244140.
 Id.; Arbitration agreements, Consumer Financial Protection Bureau, https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/arbitration-agreements/ (last visited Nov 2, 2017).
 Ann Carrns, More Big Banks Are Using Arbitration to Bar Customer Lawsuits, 2017 The New York Times, Aug. 17, 2017 at (2017), https://www.nytimes.com/2016/08/18/your-money/arbitration-bank-checking-accounts.html.
 Press Release, Office of the Press Sec’y, President Donald J. Trump Signs H.J.Res. 111 into Law, (Nov. 1, 2017), https://www.whitehouse.gov/the-press-office/2017/11/01/president-donald-j-trump-signs-hjres-111-law.
 Final Rule, Arbitration agreements, Consumer Financial Protection Bureau (July 10, 2017), https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/arbitration-agreements/.
 Arbitration Agreements, 82 Fed. Reg. 33210 (July 19, 2017) (to be codified at 12 C.F.R. pt. 1040).
 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 929-Z, 124 Stat. 1376, 1871 (2010) (codified at 15 U.S.C. § 78o).
 Sam Adriance, Industry Coalition Challenges CFPB Arbitration Rule in Court, 2017 The Nat’l L. Rev., Oct. 2, 2017 at (2017), https://www.natlawreview.com/article/industry-coalition-challenges-cfpb-arbitration-rule-court.
 See, e.g., AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (affirming the enforceability of class arbitration waivers).
 CFPB Study Finds That Arbitration Agreements Limit Relief for Consumers, Consumer Financial Protection Bureau, https://www.consumerfinance.gov/about-us/newsroom/cfpb-study-finds-that-arbitration-agreements-limit-relief-for-consumers/ (last visited Nov 2, 2017).
 Arbitration Study: Report to Congress, Pursuant to Dodd–Frank Wall Street Reform and Consumer Protection Act § 1028(a), 2015 Consumer Fin. Protection Bureau (2015), http://files.consumerfinance.gov/f/201503_cfpb_arbitration-study-report-to-congress-2015.pdf.
 Id. at 12.
 Id. at 16.
 5 U.S.C. § 801 (1996).