The Consumer Financial Protection Bureau issued a final rule on July 10, 2017, prohibiting providers of certain consumer financial products and services from including within consumer agreements a requirement that any future disputes that might otherwise be the basis of a class action to instead be arbitrated on an individual basis. The rule also requires providers to insert a provision into their arbitration agreements acknowledging this limitation. The rule is based on the Bureau’s finding that pre-dispute arbitration agreements “are being widely used to prevent consumers from seeking relief from legal violations on a class basis, and that consumers rarely file individual lawsuits or arbitration cases to obtain such relief.”
The final rule also requires providers that use pre-dispute arbitration agreements to submit records relating to arbitral and court proceedings to the Bureau. The rule applies to providers engaged in extending consumer credit, extending or brokering automobile leases, providing debt management or debt settlement services, providing assistance in avoiding foreclosure or modifying consumer credit, providing check cashing, collection or guaranty services, and collecting debt arising from any of these services, among other consumer services and products. The rule becomes effective September 18, 2017, and consumer agreements entered into as of March 19, 2018, must comply with the rule. 12 C.F.R. Part 1040 (July 10, 2017).
This post written by Benjamin E. Stearns.
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