When the Consumer Finance Protection Bureau (CFPB) released its study on the use of pre-dispute arbitration (PDA) clauses earlier this year, many expected the CFPB to propose a ban on all PDAs in contracts for consumer finance products like credit cards, checking and deposit accounts, prepaid cards, money transfer services, certain auto loans, auto title loans, small dollar or payday loans, private student loans, and installment loans. On October 7, 2015, the CFPB partially validated those expectations when it announced it was considering proposing rules that would severely curtail – but not ban – the use of PDAs. The CFPB’s proposal will ban only PDAs that require consumers to waive their right to pursue class actions.
This proposed “class waiver” ban has received most of the critical attention since the announcement, but a second aspect of the CFPB’s proposal should also get the attention of the consumer finance community: the CFPB is proposing to require consumer finance companies to disclose to the CFPB any arbitration claims filed and awards issued. The CFPB would then publish the arbitration filings and awards on the CFPB website. This disclosure requirement will have a profound effect on consumer finance companies, especially those smaller and mid-size businesses that deal with repeat filings instead of class actions.
For additional analysis on the disclosure requirement and the impact it may have on your business, please click here