- CFPB Issues Proposal to Prohibit Class Action Waivers in Consumer Arbitration Provisions
- October 26, 2015 | Author: Robert L. Carothers
- Law Firm: Jones Walker LLP - Mobile Office
- The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") included a requirement that the Consumer Financial Protection Bureau ("CFPB") conduct a study on the use and impact of pre-dispute arbitration agreements in connection with consumer financial products and services. The Dodd-Frank Act included an additional provision authorizing the CFPB to issue regulations that would "prohibit or impose conditions or limitations" on the use of pre-dispute arbitration agreements as long as such restrictions are consistent with the findings of the study. The CFPB completed its study on pre-dispute arbitration agreements in March 2015 and the banking industry has been anticipating the issuance of proposed rules based on the findings of the study.
On October 7, 2015, the CFPB announced that it is considering the following proposals relating to pre-dispute arbitration agreements:
- A proposal to prohibit the use of class action waivers in pre-dispute arbitration agreements.
- A proposal to require financial institutions that utilize pre-dispute arbitration provisions to report to the CFPB any arbitration claims filed and any amounts awarded.
- A proposal to publish the information reported on arbitration disputes and award amounts on its website.
The CFPB noted that it considered a blanket prohibition on pre-dispute arbitration agreements but decided not to impose such a restriction at this time. It stated that it intends to continue gathering information and monitoring the use of pre-dispute arbitration agreements and does not rule-out imposing additional restrictions in the future.
The proposal is only in the initial stages. At a later date, the CFPB will issue a formal proposed rulemaking for public comment and then subsequently it will issue a final rulemaking.