CFPB Proposes Rule Prohibiting Mandatory Arbitration Clauses; SFIG to Form Task Force

Last Thursday, May 5th, the Consumer Financial Protection Bureau (“CFPB”) released a proposed rule that would prohibit companies from using mandatory arbitration clauses that prevent class action lawsuits in new contracts with consumers.

The CFPB Director, Richard Cordray, explained during prepared remarks that companies would still be able to include arbitration clauses in their contracts, but for contracts subject to the proposal, the “clauses would have to say explicitly that they cannot be used to stop consumers from grouping together in a class action.” The proposal would provide the specific language that companies must use. The proposal would also require companies that use pre-dispute arbitration agreements to submit claims, awards, and certain related materials filed in arbitration cases to the CFPB so that they may monitor the process. The CFPB is also considering publishing the collected information so the public can monitor the arbitration process as well.

SFIG will be forming a task force to evaluate the proposal and determine SFIG's potential response. If you are interested in participating, please contact Alyssa.Acevedo@sfindustry.org or Jennifer.Wolfe@sfindustry.org.

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