Forbes reports that it is likely that the Consumer Financial Protection Bureau (CFPB) will enact a new rule that will disallow the use of arbitration to settle consumer disputes instead of class action suits. Time is of the essence as the president elect to be sworn in next month will most likely alter the leadership of the CFPB and make it much more difficult to create a new rule like this
The attorney who pioneered the use of pre-dispute arbitration provisions in consumer contracts believes it is “very likely” that the Consumer Financial Protection Bureau will finalize its proposed set of rules prohibiting arbitration clauses that prevent class action lawsuits before President-Elect Donald Trump’s inauguration next month.
Kaplinsky, leader of the Consumer Financial Services Group for the firm Ballard Spahr LLP, recently told Legal Newsline that there is “perhaps an 80 percent” chance the bureau will issue a final rule before Jan. 20.
The payments and financial services industries care about this as the use of arbitration to settle financial disputes has been used for years and is embedded in most product disclosures:
Under the CFPB’s proposal, companies would be prohibited from putting mandatory arbitration clauses in new contracts.
Many contracts for consumer financial products and services contain such clauses, which are a way to resolve disputes outside the court system.
Companies would still be able to include arbitration clauses in their contracts. However, for contracts subject to the proposal, the clauses would have to say explicitly that they cannot be used to stop consumers from being part of a class action in court.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
Read the full story here