Consumer advocates attending the October 7 hearing in Denver on the Consumer Financial Protection Bureau’s (CFPB’s) proposed rules on arbitration agreements voiced their opposition, saying the proposed rules do not go far enough to protect consumers. Some even indicated an outright ban on arbitration agreements is warranted, while others painted them as a middle ground approach.

The proposed rules would allow financial institutions to continue using arbitration agreements only if they do not preclude class-action lawsuits, and also would require institutions to report arbitration disputes and their outcomes to the CFPB.

Industry groups have voiced their opposition to what they view as stringent new requirements, but the posturing by consumer advocacy groups could make it more challenging for them to win concessions or significantly change the proposed rules.

Alan Kaplinsky, a partner at Ballard Spahr who attended the hearing, presented vigorous opposition to the rules, even stating he was offended by the CFPB referring to arbitration as a “free pass” for corporations. The proposal also could be viewed as a “de facto” ban since corporations will balk at using arbitration agreements if they do not prevent class-action suits.

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Consumer Financial Services
Consumer Financial Protection Bureau
Bank Regulation and Supervision