CFPB Receives Almost 13,000 Comments to Arbitration Proposal

As of Tuesday August 23rd, the Consumer Financial Protection Bureau (CFPB) was “flooded with nearly 13,000 public comments” to its proposal that would limit the use of mandatory arbitration clauses in consumer credit contracts, the Wall Street Journal reports. The large number of responses indicates a “rough road ahead” for the CFPB as it moves to the comment review process for the proposed regulation. Responses came in opposing and supporting the proposal, which “would make it easier for consumers to sue banks over a wide range of products from credit cards and bank accounts to private student loans.”

The rule, which was proposed in May, would “prohibit financial companies from using mandatory arbitration clauses as a way to block class-action lawsuits,” but “[c]ompanies would still be able to require consumers to enter arbitration to resolve individual disputes.” The article points out that lawmakers have also voiced their opinions on the proposed rule, and that over “100 congressional Democrats signed letters supporting the rule in early August.” In opposition, “the House appropriations bill for the fiscal year that starts Oct. 1 included a Republican-backed provision to ban CFPB funding for regulating arbitration agreements.”

SFIG submitted a comment letter outlining our members’ concerns about the negative impact that limiting the use of arbitration clauses would have on the securitization market, due to uncertainty created for the consumer credit assets underlying structured transactions. If you are interested in SFIG’s advocacy on the CFPB’s arbitration proposal or related matters, please contact Alyssa.Acevedo@sfindustry.org.

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