CFPB Proposes Rule to Rein in Nonbank Arbitration Contracts
Source: American Banker
The Consumer Financial Protection Bureau proposed a rule Wednesday to rein in arbitration clauses in a second attempt to block companies from limiting consumers' legal rights or their ability to sue or remedy alleged violations of consumer protection laws.
The proposed rule would create a nonbank public registry of non-negotiable form contracts that the bureau says "mislead consumers into believing the terms or conditions are legally enforceable." For years companies have used the fine print in consumer contracts to limit liability amounts, waive class action rights, and force customers into arbitration. The bureau views such contracts as restricting the ability of consumers to complain and to file lawsuits.
The proposal, which is open for public comment for 60 days, is substantially different from a rule the CFPB proposed in 2016 that was overturned by Congress a year later. Whereas the first arbitration rule sought to eliminate mandatory arbitration clauses in a range of financial contracts including cell phones, credit cards and checking accounts, the current proposal is aimed specifically at nonbanks that are supervised by the CFPB.
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