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CFPB Rolls Out New Arbitration Rule

Jul 10, 2017
The Consumer Financial Protection Bureau (CFPB) has issued a proposal that would alter the reporting requirements for banks and credit unions that issue home equity lines of credit (HELOCs)

The Consumer Financial Protection Bureau (CFPB) has issued a new rule that bans companies from using mandatory arbitration clauses that are used to deny groups access to the legal process.
 
In announcing its rule, the CFPB insisted that its actions would “deter wrongdoing by restoring consumers’ right to join together to pursue justice and relief through group lawsuits.” The CFPB, which first published an outline of the rule as a proposal in October 2015, noted there was existing legislation that prohibited arbitration agreements in the residential mortgage market, and instead focused on credit cards and depository accounts in its announcement.
 
“These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up,” said CFPB Director Richard Cordray. “Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”
 
The CFPB issued several exemptions to the rule, including employers offering consumer financial products or services for employees as an employee benefit, entities regulated by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission, broker dealers and investment advisers overseen by state regulators, and state and tribal governments that have sovereign immunity from private lawsuits. The rule’s effective date is 60 days following publication in the Federal Register and applies to contracts entered into more than 180 days after that.

 
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Jul 10, 2017
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