The CFPB's Ban On Mandatory Arbitration – Betting Better Behavior By Banks Will Offset Considerable Consumer Costs

It's been getting tougher for anyone to mount strong opposition to the Consumer Financial Protection Bureau's (CFPB) rule banning mandatory arbitration clauses after news broke of more misdeeds at Wells Fargo, which has admitted to forcing borrowers to pay for auto insurance they didn't need. Although Senate approval of the rule remains uncertain, banks and other lenders should prepare for it to take effect. If that's a benefit to consumers, it's one they are going to pay for. Indeed, consumers should prepare for higher costs as a consequence of that preparation and the uncertainty deregulation might fuel.

In many respects, complying with the rule will be relatively straightforward. Financial institutions will need to amend consumer contracts so that they do not prohibit class action litigation and ensure compliance with new reporting requirements regarding transparency in arbitration. They should also monitor changes that affect existing contracts and may in turn