CFPB Takes Aim at Class Action Waivers in Arbitration
On October 7, 2015, the Consumer Financial Protection Bureau (CFPB) announced that it is considering proposing rules that would prohibit companies from including in consumer contracts arbitration clauses that prevent consumers from initiating class action lawsuits.
In March 2015, the CFPB released its Arbitration Study: Report to Congress 2015, which is a report on a study conducted to evaluate the impact of arbitration provisions on consumers. The CFPB conducted the study as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Among other things, the study concluded that
- arbitration clauses “restrict consumers’ relief for disputes with financial service providers by allowing companies to block group lawsuits";
- most arbitration provisions include a prohibition against consumers bringing class actions;
- very few consumers individually pursue relief against businesses through arbitration or federal courts; and
- more than 75 percent of consumers in the credit card market did not know if they had agreed to arbitration in their credit card contracts.
As a result of the study, the CFPB is currently considering rule proposals that would
- ban companies from including arbitration clauses that block class action lawsuits in their consumer contracts, unless and until the class certification is denied by the court or class claims are dismissed by the court;
- require companies that use arbitration clauses for individual disputes to submit to the CFPB all arbitration claims and awards (which the CFPB may publish on its website for the public to view) so that the CFPB can ensure that the process is fair to consumers and determine whether further restrictions on arbitrations should be undertaken; and
- apply to nearly all consumer financial products and services that the CFPB regulates, including credit cards, checking and deposit accounts, prepaid cards, money transfer services, certain auto loans, auto title loans, small dollar or payday loans, private student loans, and installment loans.
An outline of the proposals the CFPB is currently considering here: http://files.consumerfinance.gov/f/201510_cfpb_small-business-review-panel-packet-explaining-the-proposal-under-consideration.pdf.
CFPB’s March 2015 report on arbitration provisions here: http://www.consumerfinance.gov/reports/arbitration-study-report-to-congress-2015/.
View a critique of the CFPB’s March 2015 report here: http://mercatus.org/sites/default/files/Johnston-CFPB-Arbitration.pdf.
For more information about these actions, please contact Zane Gilmer or your usual Stinson Leonard Street attorney.