In the first step for potential rulemaking, the Consumer Financial Protection Bureau (“CFPB”) published an outline of its proposed rules to ban consumer financial companies from using arbitration clauses in credit cards, bank accounts and other related agreements that prevent consumers from participating in “group lawsuits” (i.e. class actions) against companies. The CFPB also announced it is convening a Small Business Review Panel to gather feedback on its proposals from small industry stakeholders.
According to the CFPB, the benefits of its proposals include: 1. a day in court for consumers to hold companies accountable for wrongdoing; 2. deter bad actions and incentivize companies to comply with the law to avoid lawsuits; and 3. force transparency by requiring consumer financial services companies that use arbitration clauses to submit the claims filed and awards issued in arbitration to the CFPB and allow the CFPB to publish the claims filed and awards issued on its website. The full press release from the CFPB is at http://www.consumerfinance.gov/newsroom/cfpb-considers-proposal-to-ban-arbitration-clauses-that-allow-companies-to-avoid-accountability-to-their-customers/.
The language of the CFPB press release makes it clear that arbitration clauses that ban or waive class arbitrations are a target on the CFPB’s radar and that it is just a matter of time before the CFPB passes rules that either ban arbitration clauses with class arbitration waivers entirely or make it extremely difficult to enforce by creating stringent procedural hurdles to include them in consumer financial services agreements. It is not inconceivable to see the CFPB banning arbitration clauses in consumer financial agreements altogether in the not too distant future. The opinions expressed in this blog are solely those of the author and any comments, suggestions and replies can be sent to firstname.lastname@example.org. Happy Halloween!