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On Demand Audio

Arbitration Provisions in Consumer Finance Contracts: The Current Regulatory Landscape

(150 reviews)

Produced on November 18, 2016

Taught by
$ 59 Banking and Class Actions In Stock

Course Information

Time 63 minutes
Difficulty Intermediate

Course Description

As part of the Dodd-Frank Wall Street reform legislation of 2010, Congress created the Consumer Financial Protection Bureau and granted it authority to regulate financial products and services marketed to consumers. The Dodd-Frank Act also specifically charged the CFPB with studying the use of mandatory, pre-dispute arbitration agreements in contracts for such consumer financial products and services and enacting rules consistent with the results of the study.

The CFPB published the results of its arbitration study in a report to Congress in March of 2015. The report analyzed the pre-dispute arbitration provisions included in contracts for credit cards, checking accounts, payday and other short-term loans, prepaid cards, private student loans, and wireless telephone service. It also reviewed over 1800 arbitrations filed with the American Arbitration Association between 2010 and 2012 about the financial products and services that the CFPB regulates, as well as nearly 3500 individual cases filed in federal courts and 562 class actions filed in federal and selected state courts regarding the same products and services during the same three-year period.

In May of 2016, the CFPB published a proposed rule based on the results of its arbitration study. The comment period on the proposed rule closed on August 22. The proposed rule would prohibit consumer financial service providers from relying on language in arbitration agreements – their own or anyone else’s – to bar their customers from filing class actions against them in court or participating in class actions filed by others. The rule would also require covered providers to notify customers of their class action rights through an amendment to the arbitration agreement or another form of notice. Finally, the rule would mandate that covered providers submit records of any arbitration claims and awards, as well as other specific arbitration-related information, to a CFPB database for possible publication online. 

The proposed rule garnered thousands of written comments from a broad swath of consumer and civil rights groups, legal aid organizations, banks and other regulated entities, and federal and state elected officials, as well as over 100,000 comments from members of the public. Reactions ran the gamut from complaints that the agency exceeded its authority and that the proposed rule would lead to higher consumer prices as financial services companies respond to increased class action exposure, to charges that the rule did not go far enough because it failed to ban pre-dispute arbitration clauses entirely.  

Learning Objectives:
  1. Learn which consumer financial products and services are covered by the proposed CFPB arbitration rule
  2. Understand when particular aspects of the rule come into effect for both new and existing arbitration agreements
  3. Become familiar with the new regulatory requirements for covered providers under the three main sections of the rule: non-reliance, consumer disclosures, and submission of arbitral records


Karla Gilbride

Public Justice

Karla Gilbride joined Public Justice in October 2014 as our Cartwright-Baron staff attorney. Her work focuses on fighting mandatory arbitration provisions imposed on consumers and workers to prevent them from holding corporations accountable for their wrongdoing in court. She has testified before the state legislatures of New York and California on the topic of forced arbitration and recently won a victory in the Eighth Circuit against an employer that tried to use its arbitration clause to take a case out of court eight months into the litigation, only after the judge ruled in the employee’s favor on a motion.

She has also combated the tactic of corporations trying to decapitate class actions by offering individual settlements to the named class representatives, and argued and won a challenge to such pick-off attempt in the Seventh Circuit in 2015 in a case called Webster v. Bayview Loan Servicing. 

Before coming to Public Justice, Karla spent three years as an associate at Mehri & Skalet PLLC, where she worked on wage and hour, and employment discrimination cases, as well as consumer class actions and cases brought under the Fair Housing Act. She previously spent three years at Disability Rights Advocates in Berkeley, Calif., bringing disability discrimination class actions and representing disabled consumers before the California Public Utilities Commission. 

Karla graduated with honors from Georgetown Law in 2007 and clerked for Judge Ronald Gould on the U.S. Court of Appeals for the Ninth Circuit. She received her undergraduate degree from Swarthmore College with highest honors in 2002 with a major in linguistics and minor in psychology. 

She is an avid baseball fan and fantasy baseball nerd and enjoys hiking, cycling and playing goalball. 


Seth K.

Very interesting background information and capable presentation, but sadly now moot.

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