CFPB Targets Mandatory Arbitration Clauses To Protect Consumer Class Actions

On May 5, 2016, the Consumer Financial Protection Bureau ("CFPB") issued a proposed rule to prohibit providers of certain consumer financial products and services from using arbitration clauses to block consumers from filing or participating in class action lawsuits.¹ In addition, the proposed rule would impose a reporting obligation on providers of covered consumer financial products or services, requiring that certain materials filed in arbitration cases be submitted to the CFPB.² The stated purpose of the proposed rule, according to Director Richard Cordray, is to prevent "banks and financial companies [from avoiding] accountability by putting arbitration clauses in their contracts that block groups of their customers from suing them."³