On May 5, 2016, the Consumer Financial Protection Bureau (“CFPB”) announced a proposed rule that would ban the use of class action waivers in agreements between consumers and certain providers of consumer financial products or services. The CFPB’s proposal also would mandate new disclosures in agreements with consumers that include arbitration provisions and would require the covered providers to submit documentation to the CFPB for arbitrations taking place pursuant to agreements entered into with consumers after the compliance date.

The proposed rule, which was expected in light of the CFPB’s prior announcement that it intended to implement such a regulation, is likely to increase the risk of class action litigation and future regulatory actions for companies providing consumer financial products or services. The CFPB’s proposal further could impose added costs on these companies by requiring them to revise language in consumer agreements and ensure compliance with the mandate to disclose arbitration documentation to the CFPB.