Consumer Financial Protection Bureau Bans Certain Financial Services Providers From Using Mandatory Arbitration Agreements
Jul 11, 2017
Pursuant to section 1028(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (“CFPB”) issued a final Rule yesterday, July 10, 2017, that will regulate arbitration agreements in contracts for specified consumer financial product and services.
To read the full text of the Rule, click here.
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.
The final Rule also requires covered providers that are involved in an arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the CFPB and also to submit specified court records.
“In recent years, private companies have been able to override Congress’s decisions and sidestep accountability under the law, and millions of consumers have found the courtroom doors locked through mandatory arbitration clauses,” CFPB Director Richard Cordray said yesterday. “This rule throws open those doors and allows harmed consumers to band together and seek justice for themselves and all others affected in the same way where Congress has authorized such lawsuits.”
To read Mr. Cordray’s full remarks, click here.
The CFPB is also adopting official interpretations to the regulation.
To read the CFPB news release on the development, click here. To access the CFPB’s blog and a video release click here.
The New York Times reported that U.S. House Financial Services Chairman Jeb Hensarling (R-TX) may seek to reverse the CFPB action using the Congressional Review Act.
To read the article, click here.
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