Are Arbitration Clauses in Financial Contracts Going ‘Bye, Bye, Bye’?
The Consumer Financial Protection Bureau is a large, forceful organization that can influence the entire financial services industry simply by passing a rule. One regulation from this agency could crumble the foundation of the industry’s certainty and custom. Like the coach who sketches out a play before practicing, critiquing and executing it in a game, the CFPB conducts studies before it promulgates rules.
A recent agency study, which focused on the effects of arbitration clauses in consumer financial services contracts, culminated in a lengthy report issued March 10, 2015. In accordance with this report and its underlying data, the CFPB authored a plan to declare war on arbitration clauses.
Articulating its desire to ban consumer financial companies from using “free pass” arbitration clauses to avoid class action litigation, the agency is proposing regulations that further restrict the use of arbitration clauses in the financial services industry.
Republished with permission. This article first appeared in Westlaw Journal's Bank & Lender Liability on July 11, 2016.