CFPB Releases Final Rule Banning Certain Pre-Dispute Arbitration Agreements

On July 10, 2017, the Consumer Financial Protection Bureau (CFPB or the Bureau) announced its long-anticipated final rule¹ to prohibit the use of pre-dispute arbitration agreements to block consumer class actions in contracts for consumer financial products and services. As expected, the final rule largely adopts the proposed rule² released on May 5, 2016, which we previously covered in detail here.³ The issuance of the final rule comes at a politically uncertain time for the Bureau, and the rule could be overturned by Congress and the President before it even has a chance to take effect.

While the Bureau's final rule reflects concerns about the effects of mandatory consumer arbitration provisions, it will likely result in increased compliance costs and class action exposure for consumer lenders. In his speech announcing the final rule, CFPB Director Richard Cordray stressed the importance of class action lawsuits as a means to redress consumer harm and incentivize