Business groups, including the American Bankers Association, have filed suit asking a federal judge to nullify the CFPB’s recent arbitration rule.

And the groups, which also includes the U.S. Chamber of Commerce, asked that the agency be prohibited from enforcing the rule until its constitutionality can be determined.

Credit unions did not join the groups in filing the suit, but have been active in attacking the rule on other fronts. Credit union trade groups have been pushing the Senate to void the rule through the Congressional Review Act.

The CFPB rule prohibits financial institutions and others from including clauses forcing consumers into arbitration when they have complaints.

In the suit, filed in the U.S. District Court for the Northern District of Texas, the groups contend that the structure of the CFPB is unconstitutional.

That argument also is pending before the U.S. Court of Appeals for the District of Columbia, where a mortgage company has argued that the agency’s makeup is unconstitutional since the director may only be removed for cause.

In the Texas suit, the business groups also contend that the rule violates the Administrative Procedures Act because the CFPB relied on a flawed study in issuing the rule.

The groups allege that the CFPB failed to take into account problems that the rule poses, saying that it is the “very model of arbitrary and capricious agency action.”

Finally, the groups argue that the rule fails to advance the public interest or consumer welfare.

“If the rule goes into effect, it will inflict immediate, irreparable injury on Plaintiffs,” the groups argue. “Providers of consumer financial products and services will incur significant legal and compliance costs in adapting their businesses to the new rule; the vast majority of these costs will be wasted, and not recoverable, if the Rule ultimately is deemed to be contrary to law.”

A CFPB spokesman declined comment on the suit.

Credit unions have been pressing the Senate to follow the House in using the Congressional Review Act to nullify the rule. Congress can nullify agency rules by passing a resolution within 60 legislative days of the agency action.

Consumer groups said last week that they feared that a Senate vote on the resolution was imminent.

However, the Senate did not consider the legislation last week amid speculation that supporters of the resolution did not have the 50 votes needed to pass it.

Instant Insights /

Bankers & Business Groups File Suit Challenging CFPB&rsquo;s Arbitration Rule

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Bankers & Business Groups File Suit Challenging CFPB’s Arbitration Rule