CFPB Shows Grit; Issues Rule Curtailing Financial Arbitration
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The CFPB today issued a consumer-friendly rule that is likely to significantly curtail the use of arbitration in consumer financial agreements. That rule has two major components. First, it prohibits institutions from relying on arbitration clauses to avoid class actions. And second, it mandates the submission of redacted data on consumer financial arbitrations that will be accessible on the internet.
The rule was originally proposed in May of 2016, roughly a year after the CFPB issued its report on the use of arbitration in the financial industry. During the required 90-day period, the CFPB received around 110,000 public comments on its proposal. Yet, the CFPB waited over a year to finalize and issue the rule. During that time, President Trump took office and his administration reversed course on three previous arbitration-related rules/positions from the Obama Administration. That context lead to speculation that the CFPB might weaken its proposed rule or otherwise take a safer course.
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