Today the Consumer Financial Protection Bureau announced that it is issuing and seeking public comment on new proposed regulations that would prohibit providers of certain consumer financial products and services from including mandatory arbitration clauses that preclude class-action lawsuits in their consumer contracts.

The proposed rules, which were authorized by Section 1028 of the Dodd-Frank Act, come a little over a year after the CFPB released a lengthy study on the use of such arbitration clauses, and a little over six months after the CFPB issued a press release criticizing their use and announcing its intent to consider such rules.

In addition to curbing the future use of “no-class-action” arbitration clauses, the new rules would require covered entities that employ arbitration clauses to submit records relating to arbitral proceedings to the CFPB, which proposes to monitor and publish information about such proceedings.

The proposed rules and their “supplementary information” weigh in at more than 350 pages, but here are some highlights:

Who would be affected?  The CFPB’s summary of its proposed rules explains that the proposal would apply to certain product and service providers “in the core consumer financial markets of lending money, storing money, and moving or exchanging money, including most providers” involved in:

  • consumer credit services,
  • automobile leasing,
  • debt relief and foreclosure assistance services,
  • consumer credit reporting,
  • savings accounts and electronic fund transfer accounts and activities,
  • payment processing, check cashing, and funds transmission/exchange services, and
  • debt collection activities.

When would the new proposed rules take effect?  Not any time soon—the prohibition on “no-class-action” arbitration clauses would apply only to agreements entered into more than 180 days after the date on which these proposed rules become effective, and the CFPB is proposing that the effective date be 30 days after a final rule is published in the Federal Register.  Also taking into consideration the 90-day period for comments on the proposed rule, a final rule likely would not come into force until the middle of next year, at the earliest.

How can I provide the CFPB feedback on the proposed rules?  Comments must be in writing and received by the CFPB within 90 days after the proposed rule is published in the Federal Register.  Comments can be submitted by email, over the Internet, or by mail or courier.