Pub. 6 2016-2017 Issue 1

14 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S FEATURE ARTICLE ZANE GILMER ATTORNEY STINSON LEONARD STREET What Banks Need to Know About the CFPB’s Proposed Rule to Limit Arbitration Provision in Consumer Agreements If the proposed rule is finalized, it will likely have a significant impact on banks. O n May 5, 2016, the Consumer Financial Protection Bureau (CFPB) announced a long-awaited and highly-controversial proposed rule that, if adopted, would pro- hibit certain financial services companies, including banks, frombanning consumer class actions as part of mandatory pre-dispute arbitration agreements and would require companies to report certain arbi- tration data to the CFPB. If the proposed rule is final - ized, it will likely have a significant impact on banks. What Does the Proposed Rule Require? The proposed rule seeks to do two things. First, to prohibit certain entities and persons (re- ferred to as providers), which include banks, that offer or provide financial products or services to consumers, from using pre-dispute arbitration agreements to bar consumers from bringing class action lawsuits against the providers in connection with the covered financial products and services. Second, the proposed rule would require providers that use pre-dispute arbitra- tion agreements to submit certain records and information concerning arbitration to the CFPB, which the CFPB will utilize, for among other reasons, to determine if further arbitration-related rulemaking is necessary. Which Transactions Would Be Covered by the Proposed Rule? The scope of the proposed rule is very broad in terms of the covered products and services, as well as the entities or persons, the rule will or could apply to. For example, the proposed rule would cover providers engaged in: • Extending or regularly participating in decisions concerning consumer credit, engaging primarily in the business of providing referrals or selecting creditors for consumers to obtain such credit, and acquiring, purchasing, selling, or servicing of such credit;