Michael A. Iannucci and Richard Wolf
While questions remain about the Consumer Financial Protection Bureau’s (“CFPB”) future power, the agency, which was created by the Dodd-Frank Act in the wake of the 2008 economic crash, issued a powerful Final Rule that will ban companies from using class action waivers in arbitration clauses. The Final Rule will go into effect 60 days after its publication in the Federal Register, and arbitration agreements entered into 180 days after publication must comply with the new rule. Retail clients, banks and financial institutions, debt collectors, and credit card companies may be most impacted by the new rule, as they often utilize these arbitration clauses in consumer agreements as a less expensive—and private—alternative to litigation. The CFPB, which has faced intense scrutiny from the Trump Administration as well as challenges in federal courts, reasoned that class action litigation waivers effectively foreclose consumers from pursuing small-dollar disputes on an individual basis because doing so is not cost effective.