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CFPB Issues Final Arbitration Rule
On Monday, July 10, 2017, the CFPB issued a final arbitration rule pursuant to section 1028 of the Dodd-Frank Act. Under this section, the CFPB is required to study the use of arbitration agreements in the consumer financial markets. Once completed, the Bureau is then authorized to prohibit, condition, or limit the use of arbitration agreements if it is in the public interest, for the protection of consumers, and consistent with the study's findings. The CFPB published its final arbitration report on March 10, 2015 and issued a rulemaking proposal on May 5, 2016.
In the final rule, the CFPB prohibits "covered providers of consumer financial products and services" from using a pre-dispute arbitration agreement to block consumer class actions in court. Covered providers will be required to include language in their arbitration agreements to reflect this limitation.
The final rule also requires covered providers that use pre-dispute arbitration agreements to submit to the CFPB certain arbitral and court proceeding records. These records include, among others, initial claims and counterclaims, answers to the claims and counterclaims, and arbitration awards. Additionally, the Bureau will collect correspondences from arbitration administrators to companies regarding a company's failure to pay arbitration fees or follow the arbitrator's fairness standards. The collected information will be redacted to remove personal information and then published on the Bureau's website starting in July 2019.
The final arbitration rule is effective 60 days after publication in the Federal Register, and prospectively applies to contracts entered into more than 180 days thereafter.