The U.S. Department of the Treasury ("Treasury") released a report ("Report") criticizing the Consumer Financial Protection Bureau's ("CFPB") arbitration rule ("Rule"). The Rule restricts mandatory arbitration clauses in certain consumer financial contracts. The Rule works by (i) restricting providers from using pre-dispute arbitration agreements that prohibit class action lawsuits, (ii) mandating that providers include language in their arbitration agreements that reflects this limitation, and (iii) imposing requirements that providers submit records related to pre-arbitration agreements to the CFPB for monitoring purposes.
Under the Rule, companies still would be able to include arbitration clauses in their contracts for the resolution of individual disputes. However, in contracts that are subject to the rule, the clauses would have to contain language stating explicitly that they could not be used to stop consumers from being part of class actions in court.
In the Report, Treasury claimed that the CFPB did not appropriately consider whether the Rule would promote customer protection or benefit the public. Instead, Treasury said, the review process undertaken by the CFPB to consider the potential effects of the rule was wholly inadequate. In particular, Treasury argued that:
Treasury contended that the CFPB Rule "would upend a century of federal policy favoring freedom of contract to provide for low-cost dispute resolution." According to Treasury, the CFPB conducted a sub-standard analysis of the Rule before adopting it, and did not show that the Rule will have tangible benefits for consumers.
The Consumer Financial Protection Bureau issued a new rule that restricts mandatory arbitration clauses in certain consumer financial contracts.
The Consumer Financial Protection Bureau requested comments on proposed rules that prohibit mandatory arbitration clauses that deny aggrieved consumers the ability to participate in a class action.