The proposal would also require institutions that continue to employ arbitration to submit certain claim records, agreements and arbitrator communications related to ongoing arbitrated disputes to the bureau. The CFPB said it would use the records to monitor arbitration and that it would publish redacted records on its website. The rule would take effect 30 days after the final version is published in the Federal Register, with the rule applying to agreements entered into starting 180 days after the effective date.
The proposal would apply to all extensions of credit under the Equal Credit Opportunity Act, automobile leases, depository services under the Truth in Savings Act, payments products and services subject to the Electronic Funds Transfer Act, debt settlements, credit reports and debt collection. The proposal would cover depository institutions, nonbank lenders and money transmitters.
ABA President and CEO Rob Nichols said
Consumers will get less and pay more if the CFPB’s proposal to sideline arbitration and promote class actions is ultimately adopted. Banks resolve the overwhelming majority of disputes quickly and amicably. When needed, arbitration is an efficient, fair and low-cost method of resolving disputes in a fraction of the time – and at a fraction of the cost – of expensive litigation. This helps keep costs down for all consumers.
The bureau also issued a report from its small business review panel, which raised several concerns about the cost of the proposal to small businesses. The CFPB dismissed most of those concerns in the text of its proposed rule. Comments are due on the proposal 90 days after it is published in the Federal Register.
Read the proposed rule.
Read the small business panel report.