CFPB Publishes Long-Awaited Proposed Rule Precluding Class-Action Waivers in Arbitration Agreements
On May 5, 2016, the Bureau of Consumer Financial Protection (“CFPB”) released its long-awaited Proposed Rule (and Official Interpretations) regarding arbitration provisions in agreements for consumer financial products and services, pursuant to section 1028(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). This Stroock Special Bulletin provides an overview of the Proposed Rule which, as predicted, would prohibit covered providers, essentially any consumer financial services company, from including or enforcing arbitration provisions in consumer financial services agreements that prevent filing or participating in class-action lawsuits.
If finally approved, the Rule will apply to new consumer financial services agreements entered into more than 180 days after the effective date of the Final Rule. Importantly, the Rule will generally not be retroactive from its effective date. Accordingly, subject to a potentially limited exception discussed in this Special Bulletin, arbitration agreements with class-action waivers that are in place as of that date will not be subject to the Rule. The CFPB has not specifically addressed whether it will treat existing class-action waivers in arbitration agreements as unfair, deceptive or abusive.