CFPB Proposes Mandatory Arbitration Clause Rule

By Jeff Bater, Bloomberg BNA

Banks and other financial companies could no longer use mandatory arbitration clauses to prevent class-action lawsuits under a proposed rule released May 5 by the Consumer Financial Protection Bureau (CFPB).

Business groups immediately criticized the proposal as a “gift” to plaintiffs’ lawyers they say could result in an explosion in litigation. The long-awaited plan was expected by the industry following years of study by the bureau, which is giving stakeholders 90 days to comment on the proposal.

The rule, which leaves room for mandatory arbitration by consumers pursuing claims individually, would apply to most consumer ...