The Consumer Financial Protection Bureau announced a proposal on October 7 that would bar banks and other firms from including arbitration clauses that block class action lawsuits in agreements governing a range of financial services products.

At a field hearing in Denver on the proposal, Alan Kaplinsky, a partner at Ballard Spahr, called the Bureau’s approach “a de facto ban.”

“If this proposal becomes final regulation, most companies will simply abandon arbitration altogether,” he said. “That’s because the cost-benefit analysis of using arbitration will shift dramatically. While companies’ dispute-resolution costs will soar, consumers will be the ultimate losers here. They will no longer have available to them arbitration, which has been proven by the CFPB’s own data in its own arbitration study to be a faster, cheaper, and more effective form than courts for resolving disputes.”

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Consumer Financial Services
Consumer Financial Protection Bureau
Bank Regulation and Supervision