Today, the CFPB issued a statement indicating that they are going to propose a rule that would prohibit the financial services industry (banks, credit card issuers etc.) from including class action waiver provisions in pre-dispute arbitration agreements that they require consumers to sign as a condition of doing business with the financial services provider. In other words, under the proposed rule, signing an arbitration agreement would not preclude the consumer from joining other consumers in a class action claim in court against the bank or other financial services provider.

The CFPB’s proposed rule prohibiting companies from blocking group lawsuits through the use of arbitration agreements is a terrific development for consumers. The CFPB study issued a few months ago revealed that banks and other financial services providers use arbitration agreements as claim suppression devices — because the claims consumers have are mostly small value, an arbitration agreement discourages them from trying to vindicate their claims individually. Only if they can join with other consumers in a class proceeding can they effectively vindicate their rights and the rights of other consumers. The CFPB’s move is important because the Supreme Court routinely enforces arbitration agreements with class action waivers. Thus, consumer claims have been effectively suppressed.

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