On July 10, 2017, the Consumer Financial Protection Bureau (CFPB) announced a final Rule banning the use of class action waivers in a broad range of consumer finance agreements. The Rule, which was expected in light of prior CFPB announcements, is likely to increase the risk of class action litigation for companies selling consumer finance products and services.

Background & Proposed Rule -

The Rule is the result of direction the CFPB received in the Dodd-Frank Wall Street Reform and Consumer Protection Act to study the effect of pre-dispute arbitration provisions in consumer finance agreements. In March 2015, the CFPB completed a study on these provisions and presented the results to Congress, which authorized the CFPB to issue regulations restricting the use of arbitration agreements if the CFPB found such regulations to be in the public interest. Late in 2015, the CFPB issued an “outline of proposals” that it intended to implement regarding pre-dispute arbitration agreements, including a proposal to ban class action waivers.