CFPB Arb Rule Appears Dead

Last night, Vice President Pence broke a 50-50 tie vote in the U.S. Senate, narrowly approving repeal of a rule that blocked financial companies from requiring consumers to resolve disputes with individual arbitration proceedings. The Senate vote followed earlier House approval and now goes to President Trump for his expected signature into law. The action is a defeat to the Consumer Financial Protection Bureau (CFPB), the federal financial industry watchdog group created under President Obama that approved the rule last summer with an effective date of March 19, 2018. It allowed consumer class actions against credit card companies and other financial institutions. The CFPB rule would have required sending a notice or to amend an arbitration agreement if entered into on or after March 19th and offered variable examples of language to use for agreements applying to multiple products or services, if not all were covered by the rule. According to the CFPB, there were two main parts: First, the final rule prohibited covered providers of certain consumer financial products and services from using an agreement with a consumer that provided for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action concerning the covered consumer financial product or service. Second, the final rule required covered providers involved in an arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the Bureau and also to submit specified court records. The bureau also adopted official interpretations to the proposed regulation. See full story here-- https://usat.ly/2h6FFIz and final rule language here-- http://bit.ly/2yKBRak

Arbitration Attacked

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. Where parties agreed to arbitrate disputes, claims could still be brought, but on an individual basis in arbitration. New rules being promulgated by the Consumer Financial Protection Bureau or CFPB would allow class-action lawsuits, setting up the latest clash between the banking industry and consumers. The CFPB aims to prohibit financial companies from using mandatory arbitration clauses as a way to block class-action lawsuits, in which a large number of plaintiffs with similar complaints band together. Companies still would be able to require consumers to enter arbitration to resolve individual disputes. Critics maintain this will result in higher litigation costs for banks, which they will offset either by raising the costs of consumer loan products or reducing services. Arbitration clauses have become widespread in recent years, aided by a string of court rulings that have limited the ability of consumers to file lawsuits. The agency’s proposal would be the first significant check on arbitration since recent U.S. Supreme Court decisions that affirmed its widespread use. The landmark Supreme Court case, AT&T Mobility v. Concepcion, allowed businesses to enforce class-action waivers in contracts. The new rule is expected to take effect next year after a 90-day public comment period to federalregistercomments@cfpb.gov and drafting of the final rule. See more here-- http://on.wsj.com/24Cl284 and http://nyti.ms/1QSVNF0 and http://files.consumerfinance.gov/f/documents/CFPB_Arbitration_Agreements_Notice_of_Proposed_Rulemaking.pdf

The French Do It Better? Je dis ça, je dis rien

French consumers must currently bring claims against French companies to court. Though come 2016, French companies offering goods and services to consumers will need to provide mediation mechanisms-- free of charge-- in disputes arising from poor performance of a merchandise sale contract or a service agreement. The new requirements come with implementation of recent EU Directives on alternative dispute resolution for consumer disputes. The rules are applicable to any individual or legal entity, whether public or private, acting as part of a commercial, industrial, non-industrial or free market activity. Both domestic and cross-border disputes are subject to these rules. As such, companies must provide consumers with mediator contact details in a clear and legible manner on their website along with their TOC of sale or services, their purchase orders or any other relevant media. Consumer mediation will be observed, evaluated, and controlled by a new entity called the Commission for the Evaluation and the Control of Consumer Mediation (la Commission d’évaluation et de contrôle de la médiation de la consommation – CECMC). Reportedly, mediation will remain an option for consumers and will not be obligatory. Non-compliance on the part of those parties subject to the rules can be administratively fined up to three thousand Euros for individuals and €15,000 for corporations. See more here-- http://bit.ly/1OdhQvr and http://bit.ly/1JuKjbK

AAA's New Consumer Arbitration Rules

This month, the American Arbitration Association's new Consumer Arbitration Rules became effective. According to AAA, these rules apply when arbitration clauses exist in agreements between individual consumers and businesses where a business has standardized, systematic application of arbitration clauses to its customers and where the terms and conditions of the purchase of standardized, consumable goods or services are non-negotiable or primarily non-negotiable in most or all of its terms, conditions, features, or choices. The product or service must be for personal or household use. The AAA will have discretion to apply the Consumer Arbitration Rules and parties can bring any disputes concerning the application or non-application to the attention of the arbitrator. Businesses are required to submit their consumer arbitration clause to the AAA for review and determination that the clause substantially and materially complies with the due process standards of the AAA’s Consumer Due Process Protocol and the amended Consumer Rules. Businesses will only be included in the registry after the AAA reviews a submitted clause, receives the required fee and determines that it will arbitrate a consumer-related dispute under the clause. The fee has been lowered to $500 for clauses submitted in 2015. AAA will charge an annual renewal fee starting in 2016. Each variation of the business’s arbitration clause must be separately registered. If a business has not registered its consumer clause prior to the filing of a consumer case, the AAA will require that the business register its clause at that time for an additional fee of $250 for an expedited review. Additionally, any subsequent revisions to a currently registered arbitration clause must be resubmitted for review. A fee of $500 will be assessed to review revisions. See more here-- http://bit.ly/Z7rSWJ and http://bit.ly/1lAgU6l