WASHINGTON – The financial services industry is at risk of being caught flat-footed if a legislative measure to rescind the Consumer Financial Protection Bureau’s rule regulating arbitration agreements fails to pass.

The industry has been counting on a Republican-controlled Congress to strike down the CFPB’s rule using the Congressional Review Act, but as lawmakers recessed for an August break last week, the prospects for overturning the rule are uncertain. If lawmakers do not act, the rule is set to go into effect in mid-March.

In the meantime, institutions must also decide whether to continue to use arbitration agreements, since they could no longer get class-action waivers.

"I don’t think banks and companies are prepared at this juncture," said Alan Kaplinsky, a partner at Ballard Spahr. "We have counseled our clients to prepare for the worst-case scenario of the compliance date happening on March 19 of next year."

Kaplinsky said he believes institutions have the time to get ready, but clearly many are hoping they won’t have to be.

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