Ending months of speculation and insider reading of tea leaves, on July 10, 2017, the Consumer Financial Protection Bureau (CFPB or Bureau) published a final rule regarding the use of arbitration agreements in specified consumer financial contracts. As was substantively expected, the Final Rule: 1) bars class action waivers; and 2) imposes reporting requirements for individual arbitrations conducted pursuant to pre-dispute arbitration agreements. The Final Rule is accompanied by more than 740 pages of Supplementary Information in which the CFPB largely repeats the findings of its earlier Report to Congress and the Supplementary Information that accompanied its Proposed Rule and concludes that class action litigation and CFPB monitoring of individual arbitrations are both “in the public interest” and “for the protection of consumers.”
BACKGROUND -
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) mandated a CFPB study on the use of pre-dispute arbitration clauses in connection with the offering or provision of consumer financial products and services, with a report of its findings sent to Congress. The Dodd-Frank Act further authorized the CFPB to prohibit or impose conditions or limitations on the use of arbitration clauses by regulation if the CFPB determined that it would be in the public interest and for the protection of consumers to do so. However, any such regulation must be consistent with the findings of the CFPB’s study.
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