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Thursday, January 9, 2014

Prediction CFPB Will Ban or Limit Arbitration Class Waivers

Last month, the Consumer Financial Protection Bureau released the preliminary results of its study on arbitration in consumer financial transactions such as credit cards, checking accounts and payday loans.  James McGuire and Kay Fitz-Patrick at Morrison & Foerster LLP say "We can expect that, after completing its study, the CFPB will issue a rulemaking that either bans or limits the use of arbitration clauses with class waivers in connection with financial products."

The MoFo lawyers' prediction is backed by some good points under the heading “POLITICAL CLIMATE”:

·         “there has been increased criticism of the inclusion of arbitration clauses, especially those that contain class waivers, in consumer contracts since the Supreme Court has twice ‘rejected the argument that class arbitration was necessary to prosecute claims that might otherwise slip through the legal system’ – in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011) and in American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013).”

·         “The hostility towards the decisions is further evidenced by” the Senate Judiciary hearing on December 17, 2013. Senator Al Franken presided over the hearing quite assertively.

·         Sen. Franken reintroduced legislation seeking to prevent enforcement of pre-dispute arbitration agreements in contracts of adhesion.


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