On July 10, the CFPB issued its much-anticipated final arbitration rule which prohibits covered entities from including mandatory arbitration clauses in contracts that block class-action litigation. The rule will become effective 60 days after publication in the Federal Register, but will only apply to pre-dispute arbitration agreements for covered products or services entered into on or after the 241st day after it is published in the Federal Register.
The CFPB’s executive summary provides a high-level overview of the rule and is a useful resource to become familiar with the rules basic requirements.
Not surprisingly, the Bureau’s announcement generated plenty of discussion regarding the rule and the possibility that Congress will void the rule. Here’s a roundup of a few articles covering the Bureau’s arbitration rule:
- Isaac Boltansky of Compass Point estimates that “the odds of the CFPB’s arbitration rule being reversed via CRA are slightly less than 50% given the Congressional calendar and initial channel checks.”
- Emily Stewart reports in The Street that Arkansas Senator Tom Cotton has stated that he has already begun the process to roll back the rule using the Congressional Review Act.
- Jeff Sovern reacts to Senator Cotton’s announcement that he intends to block the rule using a CRA challenge in a post titled Senator Cotton’s Ignorance About Ignorance and the CFPB’s Arbitration Rule on the Consumer Law Blog.
- In his LA Times column, Banks and credit card companies can’t try to stop you from joining a class action lawsuit – for now, David Lazarus writes that while Republican lawmakers will move quickly to overturn the rule, he ultimately predicts that, “Graham and other Republicans who may be waffling on healthcare won’t also pick a fight on arbitration. They may feel that crushing the CFPB’s new rule will help Senate Leader Mitch McConnell save face after the bruising healthcare battle.”
- On American Banker, Kate Berry and Ian McKendry report that Acting Comptroller of the Currency Keith Noreika sent a letter to Cordray raising questions about the rule’s impact on financial stability. But Eric Goldberg, a CFPB senior counsel, said the CFPB consulted with the Treasury Department and other prudential regulators before issuing the rule.
- While the most likely vehicle to overturn the arbitration rule is a CRA challenge, there is another route to setting aside the rule – a petition to the Financial Stability Oversight Council (FSOC). Adam Levitin discusses the chances that FSOC will block the rule in his article at Credit Slips. Alan Kaplinsky shares his thoughts on a possible FSOC veto here.