CFPB to Host Field Hearing About Arbitration Clauses

May 3, 2016

The Consumer Financial Protection Bureau will hold a field hearing on May 5 to discuss the use of arbitration clauses.

The field hearing will be held at 11 a.m. MDT, at the Albuquerque Convention Center in New Mexico. This event is open to the public and requires an RSVP. Email the CFPB to RSVP. A live video will be streamed on the bureau’s blog.

It is expected that the bureau will use this field hearing to release its proposed rule on the use of mandatory arbitration agreements in certain consumer financial services contracts.

At an October 2015 Small Business Regulatory Enforcement Fairness Act (SBREFA) panel, the bureau outlined proposals to ban the use of class action waivers and require greater data reporting. Recently Director Cordray signaled the CFPB was moving in this direction. Supporting this proposal is a 728-page study of consumer financial services arbitration as mandated by Section 1028 of the Dodd-Frank Act. 

The not-quite-proposed arbitration rule should be of minimal impact on the arbitration provision in title insurance policies. Thanks to ALTA lobbying efforts in 2009-2010, "the business of insurance" is not considered a consumer financial product or service under Dodd-Frank and is outside the bureau's scope except as specifically outlined in RESPA and TILA. While the CFPB does have authority to regulate real estate settlement services, ALTA is not aware of widespread use of arbitration clauses in these agreements.

From an industry perspective arbitration is a helpful tool because it is typically less costly, takes decisions out of the hands of juries and puts them in the hands of more impartial and less inflamed arbiters and can help limit spurious class actions suits by making them more costly for plaintiffs.

Assuming the CFPB issues its proposed rule on or around May 5, it is likely that any final rule would not take effect before summer 2017. If you have any questions, please contact Steve Gottheim, ALTA's senior counsel, at [email protected]


Contact ALTA at 202-296-3671 or [email protected].