On May 4, 2016, the Consumer Financial Protection Bureau (CFPB) issued long-awaited proposed rules that would, among other things prohibit mandatory arbitration clauses in certain consumer contracts. The CFPB’s press release indicates that the proposal aims to eliminate the “contract gotchas” that allow banks and consumer finance companies to “sidestep the legal system, avoid accountability and continue to pursue profitable practices that may violate the law and harm countless consumers.” The CFPB further indicates that the proposal is specifically designed “to protect consumers’ right to pursue justice and relief, and deter companies from violating the law.” Reading between the lines, what the proposal would appear to contemplate going forward is the ability of consumers to pursue their day in court through class action relief, which, as we have written about before, may benefit class action plaintiff’s attorneys more than consumers. To that end, we expect robust comments from industry in the 90 days following publication in the Federal Register.
The CFPB proposal is available at: http://files.consumerfinance.gov/f/documents/CFPB_Arbitration_Agreements_Notice_of_Proposed_Rulemaking.pdf
The Small Business Review Panel report is available at: http://files.consumerfinance.gov/f/documents/CFPB_SBREFA_Panel_Report_on_Pre-Dispute_Arbitration_Agreements_FINAL.pdf
The March 2015 CFPB report on arbitration is available at: http://www.consumerfinance.gov/reports/arbitration-study-report-to-congress-2015/.