CFPB Issues Rulemaking on Arbitration Agreements in Financial Products and Services Contracts
May 16, 2016
On May 16, 2016, the firm published an alert titled “CFPB Issues Rulemaking on Arbitration Agreements in Financial Products and Services Contracts.”
On May 5, 2016, the Consumer Financial Protection Bureau (“CFPB”) proposed a rule that would govern two aspects of consumer finance dispute resolution. First, the new regulations would prohibit providers of certain consumer financial products and services from including in their contracts arbitration clauses that prohibit class action lawsuits. Second, covered providers involved in an arbitration pursuant to a pre-dispute arbitration agreement would be required to submit specified arbitral records to the CFPB. If the proposed rule becomes final, it will significantly impact the current industry practice of including arbitration clauses with class action waivers in these types of contracts, which the Supreme Court has ruled are valid in a recent series of cases addressing the issue. As the CFPB has indicated that the proposed rule would apply only to agreements entered into more than 211 days after rule publication, affected companies may wish to consider whether to amend the dispute resolution provisions currently used.