Hold Onto Your Hats: CFPB Proposed Rules Will Lead to Lots of Class Action Litigation
This post has been viewed 2,556 times.
Today the Consumer Financial Protection Bureau proposed the rules that it previewed last fall, following up on its Arbitration Study. Those rules would essentially ban class action waivers from consumer financial agreements, as well as requiring arbitral institutions to provide data on consumer financial disputes to the CFPB. (As an aside, the proposal is 377 pages long. Are all proposed notices of rulemaking so long?? If so, I am very happy not to practice in administrative law.)
There will be lots of analysis of the rules and their potential impact in the coming days, but for now here are the deets on the proposal, with direct quotes from it where appropriate:
What Do the Proposed Rules Say? Two things.
- First, financial consumers will be entitled to participate in class actions in court, even if the governing agreements call for arbitration generally:
“A provider shall not seek to rely in any way on a pre-dispute arbitration agreement . . . with respect to any aspect of a class action that is related to any of the consumer financial products or services covered by § 1040.3 including to seek a stay or dismissal of particular claims or the entire action, unless and until the presiding court has ruled that the case may not proceed as a class action and, if that ruling may be subject to appellate review on an interlocutory basis, the time to seek such review has elapsed or the review has been resolved.”
The arbitration agreement must clarify:
“We agree that neither we nor anyone else will use this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it.”
- Second, providers of arbitration services must submit redacted copies of the following documents to the CFPB for its continuing monitoring:
“In connection with any claim filed in arbitration by or against the provider concerning any of the consumer financial products or services covered by § 1040.3;
(A) The initial claim and any counterclaim;
(B) The pre-dispute arbitration agreement filed with the arbitrator or arbitration administrator;
(C) The judgment or award, if any, issued by the arbitrator or arbitration administrator”
Read original articleTags:
