The Consumer Financial Protection Bureau (the “CFPB”), a consumer watchdog agency, unveiled a proposed rule that would restrict the use of arbitration clauses in contracts with respect to consumer financial products and services such as bank accounts, credit cards and other types of consumer loans.  

The Proposed Rule

The new rule would aim to restore customers’ rights to bring class-action lawsuits against financial firms by prohibiting financial companies from using mandatory arbitration clauses in consumer financial contracts as a way to block class-action lawsuits.  The rule is expected to take effect next year after a 90-day public comment period and drafting of the final language of the rule.  

Its Affects

The new rule would not need congressional approval in order to be effective; however, the rule would not apply to pre-existing agreements. The proposed rule would also assist the CFPB in gathering data on arbitration claims by requiring specified and redacted arbitral records to be submitted to the CFPB.

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