The Consumer Financial Protection Bureau has announced it will be opening a docket and seeking input from the public on a proposal that was filed last week by a number of consumer advocacy organizations that filed a petition asking the CFPB to issue a rule on mandatory pre-dispute arbitration provisions in contracts between financial services companies and consumers.
This would not be the first time that the CFPB has attempted a rulemaking on arbitration. Back in 2017, Congress, under the Congressional Review Act, repealed a rule that had been issued by the CFPB – but had not yet gone into effect. That rule would have prohibited the use of class action waivers in arbitration agreements, among other provisions.
In response to the proposal, which was submitted by the National Association of Consumer Advocates, Public Citizen, the American Association for Justice, Public Justice, the National Consumer Law Center, Consumer Federation of America, the UC Berkeley Center for Consumer Law & Economic Justice, Americans for Financial Reform, and Better Markets, Inc., the CFPB released the following statement in response to an article that was published on Bloomberg Law.
“Americans are overwhelmed by increasingly lengthy, complex, and one-sided fine print in form contracts. The CFPB is focused on companies that use fine print to extract extra money, lock people into unwanted business relationships, gain advantages they could not obtain in fair and competitive markets, or circumvent the rule of law. For example, in January the CFPB proposed to create a public registry of nonbank financial companies that purport to limit consumer rights or protections in form contracts, including arbitration clauses.
We welcome participation in our rulemaking petition program, on the part of consumer groups who filed this petition or any other members of the public. We are carefully considering the proposal relating to arbitration clauses, and will be opening a public docket and taking comment from the public on the proposal.”
Arbitration clauses “prohibit consumers from exercising their constitutional rights to a jury trial,” the groups note in their proposal and “runs counter to the public interest.” Since the previously issued rule was overturned in 2017, the use of arbitration clauses has only expanded, according to the petition. More than 80% of financial services companies use arbitration clauses and nearly all of those companies include bans on class actions being filed against them.
As long as the new rule is not “substantially” in the same form as the original rule, there is nothing to prohibit the CFPB from taking another crack at issuing a rule, although the CRA does not define what constitutes whether a rule is substantially the same or not.
