CFPB Publishes Arbitration Rule
The Consumer Financial Protection Bureau (CFPB) issued its final rule today on arbitration clauses, only a few days after Rep. Jeb Hensarling, Chairman of the House Financial Services Committee, threatened CFPB Director Richard Cordray with contempt charges if the rule were published. Totalling 775 pages, the new rule is intended to limit the ability of financial service providers to restrict class action lawsuits by consumers via arbitration provisions in contracts. Covered persons under the rule must submit arbitration and select court records to the CFPB.
Section 1040.3(b)(2) of the final rule exempts tribal governments and “arms” of the tribe that possess immunity from private suit from the class rule. The exclusion reads: “(ii) Any State, Tribe, or other person to the extent such person qualifies as an “arm” of a State or Tribe under Federal sovereign immunity law and the person’s immunities have not been abrogated by the U.S. Congress.” The CFPB interprets this section to mean:
Section 1040.3(b)(2)(ii) excludes Tribes and other persons to the extent that they would be an arm of a Tribe under Federal sovereign immunity law and their immunity has not been abrogated by the U.S. Congress. For purposes of this exclusion, the term “Tribe” refers to any federally recognized Indian Tribe, as defined by the Secretary of the Interior under section 104(a) of the Federally Recognized Indian Tribe List Act of 1994, 25 U.S.C. 479a-1(a).
The final rule is scheduled to go into effect 60 days after its publication on July 10th. All arbitration agreements by covered persons must comply with the rule within 180 days of publication.
Read the final rule in its entirety here.