Originally from Alternatives to the High Cost of Litigation

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Nearly lost in the politics surrounding the Consumer Financial Protection Board’s §1040 rule—which regulates mandatory arbitration clauses in financial services consumer contracts—are the new rule’s requirements.

The ban on class waivers in consumer financial services contracts has been well covered— strongly supported by consumer groups as a restoration of individual rights, and heavily criticized by Beltway business lobbyists as a gift to plaintiffs’ trial lawyers.

The CFPB—an independent Washington, D.C., agency formed under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act to protect consumers in dealing with financial services contracts—provided a rule on July 10 that prohibits the use of class waivers that require agreeing to pre-dispute mandatory arbitration in the contracts over which it has jurisdiction.

But less well known is that the CFPB’s final rule provides an arbitration reporting requirement. A by-product is that the rule gives force to private providers’ codes for ethical ADR conduct.