• CFPB Issues Final Consumer Arbitration Rule
  • October 4, 2017 | Authors: Marjorie A. Corwin; Christopher R. Rahl
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • On July 10, 2017, the Consumer Financial Protection Bureau (CFPB) released its final consumer arbitration rule. The final rule, published in the July 19, 2017 Federal Register, largely follows the CFPB’s May 24, 2016 proposed arbitration rule by prohibiting the inclusion of class action waivers in most consumer arbitration agreements. Arbitration agreements can still be used by financial institutions and other covered businesses, but when the CFPB's rule becomes effective, consumers can no longer be required to give up the right to bring or participate in a class action lawsuit. The rule also requires the inclusion in consumer arbitration agreements of a specific disclosure concerning class action rights. Additional disclosures are required where a consumer arbitration agreement applies to multiple products/services and only some of the products/services are subject to the CFPB’s final rule. The final rule takes effect on September 18, 2017, but will only apply to consumer arbitration agreements entered into (and new products/services obtained) 180 days after the effective date (March 19, 2018). There is significant industry and legislative opposition to the final rule. On July 25, 2017, The United States House of Representatives voted to repeal the CFPB’s rule and prohibit implementation of a similar rule in the future. The repeal resolution is before the United States Senate, but a similar repeal vote in the Senate appears unlikely. Unless implementation of the final rule is blocked, financial institutions and other covered businesses that currently include an arbitration agreement in their consumer agreements will need to evaluate whether they want to continue to use arbitration as the default dispute resolution method without the ability to cut off class action lawsuits and, if so, will need to adjust the terms of their agreements to comply with the rule and include required disclosures.