Source: https://www.thecontingency.com/2016/05/feds-propose-pro-class-action-rule-for-banks/
Timestamp: 2019-04-24 04:16:19+00:00

Document:
Last October, the Consumer Financial Protection Bureau published a study on how banks and other lenders use bans on class actions to save money.
The study resulted from a mandate in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
In 2016, despite contracts that mandate one-on-one arbitrations, consumers will likely gain the right to bring claims against banks, credit card issuers, and other lenders in class actions. The new rule, which the Consumer Financial Protection Bureau announced on October 7, 2015 it will probably issue next year, will partially reverse a string of recent Supreme Court decisions that made class-banning arbitration clauses broadly enforceable.
The action by the Bureau will vastly raise the stakes for disputes involving practices affecting large numbers of consumer finance customers.
On May 5, 2016, the CFPB took the next step. It asked for comment on rule language.
1040.1 Authority, purpose, and enforcement.
1040.4 Limitations on the use of pre-dispute arbitration agreements. 1040.5 Compliance date and temporary exception.
Supplement I to Part 1040—Official Interpretations.
Authority: 12 U.S.C. 5512(b) and (c) and 5518(b). § 1040.1 Authority, purpose, and enforcement.
(a) Authority. The regulation in this part is issued by the Bureau of Consumer Financial Protection (Bureau) pursuant to sections 1022(b)(1) and (c) and 1028(b) of the Dodd-Frank Act (12 U.S.C. 5512(b) and (c) and 5518(b)).
(b) Purpose. The purpose of this part is the furtherance of the public interest and the protection of consumers regarding the use of agreements for consumer financial products and services providing for arbitration of any future dispute.
(a) Class action means a lawsuit in which one or more parties seek class treatment pursuant to Federal Rule of Civil Procedure 23 or any State process analogous to Federal Rule of Civil Procedure 23.
(b) Consumer means an individual or an agent, trustee, or representative acting on behalf of an individual.
(2) An affiliate of a provider as defined in paragraph (c)(1) of this section when that affiliate is acting as a service provider to the provider as defined in paragraph (c)(1) of this section with which the service provider is affiliated consistent with 12 U.S.C. 5481(6)(B).
(d) Pre-dispute arbitration agreement means an agreement between a provider and a consumer providing for arbitration of any future dispute between the parties.
(iii) A debt collector as defined by 15 U.S.C. 1692a(6).
(5) Any person to the extent the limitations in 12 U.S.C. 5517 or 5519 apply to the person or a product or service described in paragraph (a) of this section that is offered or provided by the person.
§ 1040.4 Limitations on the use of pre-dispute arbitration agreements.
(a) Use of pre-dispute arbitration agreements in class actions.
(1) General rule. A provider shall not seek to rely in any way on a pre-dispute arbitration agreement entered into after the date set forth in § 1040.5(a) with respect to any aspect of a class action that is related to any of the consumer financial products or services covered by § 1040.3 including to seek a stay or dismissal of particular claims or the entire action, unless and until the presiding court has ruled that the case may not proceed as a class action and, if that ruling may be subject to appellate review on an interlocutory basis, the time to seek such review has elapsed or the review has been resolved.
(iii) When the pre-dispute arbitration agreement existed previously between other parties and does not contain either the provision required by paragraph (a)(2)(i) of this section or the alternative permitted by paragraph (a)(2)(ii) of this section, the provider shall either ensure the agreement is amended to contain the provision specified in paragraph (a)(2)(iii)(A) of this section or provide any consumer to whom the agreement applies with the written notice specified in paragraph (a)(2)(iii)(B) of this section. The provider shall ensure the agreement is amended or provide the notice to consumers within 60 days of entering into the pre-dispute arbitration agreement.
(b) Submission of arbitral records. For any pre-dispute arbitration agreement entered into after the date set forth in § 1040.5(a), a provider shall comply with the requirements set forth below.
(ii) Any communication the provider receives from an arbitrator or an arbitration administrator related to a determination that a pre-dispute arbitration agreement for a consumer financial product or service covered by § 1040.3 does not comply with the administrator’s fairness principles, rules, or similar requirements, if such a determination occurs.
(2) Deadline for submission. A provider shall submit any record required pursuant to paragraph (b)(1) of this section within 60 days of filing by the provider of any such record with the arbitrator or arbitration administrator and within 60 days of receipt by the provider of any such record filed or sent by someone other than the provider, such as the arbitration administrator or the consumer.
(viii) Driver’s license and other government identification numbers; and (ix) Passport numbers.
§ 1040.5 Compliance date and temporary exception.
(a) Compliance date. Compliance with this part is required for any pre-dispute arbitration agreement entered into after [INSERT DATE THAT IS 211 DAYS AFTER PUBLICATION OF THE FINAL RULE IN THE FEDERAL REGISTER].
(b) Exception for pre-packaged general-purpose reloadable prepaid card agreements. Section 1040.4(a)(2) shall not apply to a provider that enters into a pre-dispute arbitration agreement for a general-purpose reloadable prepaid card if the requirements set forth in either paragraphs (b)(1) or (2) of this section are satisfied.
(ii) Within 30 days of obtaining the consumer’s contact information, the provider notifies the consumer in writing that the pre-dispute arbitration agreement complies with the requirements of § 1040.4(a)(2) by providing an amended pre-dispute arbitration agreement to the consumer.

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