CFPB Considering Proposals to Limit Pre-Dispute Arbitration Agreements for Consumer Financial Products and Services, Convenes Small Business Review Panel Seeking Feedback
On October 7, the CFPB issued proposals to limit the use of mandatory pre-dispute arbitration agreements, which it contends are often used to evade class action litigation. Under the proposals, the Bureau would seek to prohibit the use of pre-dispute arbitration agreements in consumer financial contracts, unless the agreements explicitly state that the agreements are not applicable to cases filed as class actions, class certification is denied by a court, or class claims are dismissed by a court. While not prohibiting pre-dispute arbitration agreements in their entirety, for companies that elect to use arbitration agreements in consumer financial contracts, the proposals would require that companies submit to the CFPB arbitration claims filed by consumers and any monetary awards issued therefrom. Furthermore, the CFPB is considering publishing the information submitted by companies on its website.
The Bureau also stated that it will convene a Small Business Review Panel, representing the initial step of a potential rulemaking. The Panel is expected to provide feedback on the impact of the proposals set forth by the Bureau and offer possible alternatives to address arbitration agreements in consumer financial contracts.