The latest out of Washington is that the Consumer Financial Protection Bureau (CFPB) has come close to finalizing yet another burdensome mandate. In the next two or three months, the CFPB is expected to issue its final arbitration ban, limiting the use of class-action waivers.
What does that mean? The proposed rule would bar financial institutions from using arbitration agreements that prevent consumers from filing or joining class action lawsuits in court. The proposal encompasses credit card companies, traditional banks, and different types of lenders, which are disproportionately prone to costly class actions. It could open the door to widespread class-action litigation risk for almost all consumer finance companies that currently utilize arbitration language in contracts with customers, leaving these companies vulnerable to significant legal fees and damages—justified or not. In the CFPB’s own words, “hundreds of millions of dollars” are at stake.
While Congress is expected to override the rule, it still goes to show the outsized influence of the CFPB’s unelected bureaucrats.