CFPB Outlines Potential Arbitration Rulemaking Initiatives
Commentary by Steven Lofchie
The Consumer Financial Protection Bureau ("CFPB") issued an outline of proposals for potential rulemaking on arbitration agreements under consideration by its Small Business Advisory Review Panel. The outline shows, among other things, that the CFPB is considering a proposed rule that might ban the application of pre-dispute arbitration clauses to class litigation in court.
This would apply to most consumer financial products and services that the CFPB oversees, including credit cards, checking and deposit accounts, prepaid cards, money transfer services, certain auto loans, auto title loans, small dollar or payday loans, private student loans, and installment loans. The CFPB noted that it continues to be "concerned" about such clauses, and that its present assessment is "inconclusive" concerning the effect of such agreements.
The CFPB indicated that the proposals generally would apply to various types of services provided to consumers (see pp. 22-23 of the outline), and that it is considering the exclusion, inter alia, of products and services that are subject already to arbitration rules issued by the SEC or the CFTC. Regarding securities arbitration, the CFPB cited the existing requirements of FINRA Rule 2268, and noted that the rule already provides substantial protections along the lines that the CFPB has suggested.
Commentary
The published outline is consistent with the CFPB's policy of encouraging litigation against financial institutions. It is notable that the CFPB finds many of the identified wrongs to be trivial (at page 3) - so trivial in many instances that consumers do not even know they have been "wronged." Apparently, the CFPB believes that the best way to right such trivial wrongs is to encourage class action litigations. (One may reasonably question the validity of this policy preference.)