Wednesday, July 26, 2017

House Votes to Rescind CFPB Arb Rules

A joint resolution of disapproval by Congress could nullify the “Arbitration Agreements” rule, 82 Fed. Reg. 33210 (July 19, 2017), just finalized by the Consumer Financial Protection Bureau (CFPB). The rules bar certain financial institutions from using contract clauses that provide for arbitration of disputes with customers to restrict participation in class-action lawsuits. The right of parties to avoid court and arbitrate contractual disputes comes from the Federal Arbitration Act of 1925. It provides that agreements to arbitrate disputes are enforceable. Decades after becoming a standard form of alternative dispute resolution, arbitration clauses were employed as a method to defeat class action lawsuits. The new rules by CFPB allow regular class-action lawsuits by consumers. The CFPB aims to prohibit financial companies from using mandatory arbitration clauses as a way to block class-action lawsuits. The new rules apply to most banks and nonbank lenders, payment processing companies, consumer reporting agencies, debt collection agencies and certain automotive finance companies. Pursuant to the Dodd-Frank Act, the arbitration rules will only apply to agreements entered into 180-days after the effective date and it will become fully effective on February 10, 2018. The Senate will take up the issue next via the Congressional Review Act, under which Congress may overturn a broad range of regulatory rules issued by federal agencies by enacting a joint resolution of disapproval within 60 days of the rules being announced. See more here-- and