July 10, 2017 Alert - CFPB Issues Anti-Arbitration Rule

 

Today, July 10th, the Consumer Financial Protection Bureau (CFPB) issued a final arbitration rule banning certain financial companies from using mandatory arbitration clauses to prevent consumers from filing or participating in a class action suit, according to a CFPB statement.

The new rule still allows companies to include arbitration clauses in contracts, however, they cannot be used to stop consumers from pursuing group lawsuits. The rule also requires certain companies involved in arbitration pursuant to an agreement to submit specified records to the CFPB.

Last August, SFIG submitted a comment letter to the CFPB on the initial proposed rule. The letter shared our membership’s concerns regarding the proposed changes to the use of mandatory arbitration clauses in credit contracts for various collateral types in securitization transactions.

SFIG has strong concerns regarding today's release by the CFPB. The litigious uncertainty created by the final rule will have a negative impact to securitization market liquidity, and correspondingly to the price and availability of credit to U.S. consumers, thereby hurting the very people the rule is intended to benefit.

If you have any questions, please contact Alyssa.Acevedo@sfindustry.org.

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