On May 5, 2016, the Consumer Financial Protection Bureau (CFPB) presented for public comment its proposed rule prohibiting the use of mandatory pre-dispute arbitration clauses that waive class action lawsuits. The proposed rule would require providers to explicitly disclose to consumers that the arbitration agreement may not be used to prevent the consumer from being part of a class action lawsuit. Only after the class claims are dismissed or class certification is denied may a case proceed to arbitration. The proposed rule would also require submission of the records of the arbitration to the CFPB so that it may monitor arbitration results in order to ensure fairness to consumers. The CFPB is also holding open the possibility that arbitration results would be published by the CFPB. Private arbitrations are rarely reported and contain no real record of proceedings.

The disclosures, if approved, would require all new arbitration provisions to state: “We agree that neither we nor anyone else will use this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it.” The proposed rule would end the use of what CFPB Director Richard Cordray described as “gotcha” clauses, during his prepared remarks at the unveiling of the rule.