On July 10, the Consumer Financial Protection Bureau issued a rule banning companies from denying arbitration to groups of people.
“The Consumer Financial Protection Bureau today announced a new rule to ban companies from using mandatory arbitration clauses to deny groups of people their day in court,” according to the agency’s press release. “Many consumer financial products like credit cards and bank accounts have arbitration clauses in their contracts that prevent consumers from joining together to sue their bank or financial company for wrongdoing.”
The release further states that “the Dodd-Frank Wall Street Reform and Consumer Protection Act required the CFPB to study the use of mandatory arbitration clauses in consumer financial markets. Congress also authorized the bureau to issue regulations that are in the public interest, that are for the protection of consumers, and which are based on findings that are consistent with the Bureau’s study of arbitration.”
The new CFPB rule applies to the major markets for consumer financial products and services overseen by the bureau, including those that lend money, store money, and move or exchange money. The rule’s effective date is 60 days following publication in the Federal Registry and applies to contracts entered into more than 180 days after that.
Whatever your stance on the ruling, it will have an impact on lenders serving the retail automotive market as well as self-financing “buy-here, pay-here” dealers. Fortunately, you have some time to make revisions in your compliance program. Unless Congress takes action, the rule will go into effect Sept. 19.
In a recent episode of the EFG Common Sense Compliance podcast, we spoke with Shaun Petersen, senior vice president of legal and government affairs at the National Independent Automobile Dealers Association Services Inc., about the organization’s perspective on the rule.
“Our members are not pleased with the rule and feel it is unnecessarily prohibitive,” Peterson said. “As an organization, we are expressing our displeasure to members of Congress and are encouraging our members to do the same. However, if the rule takes effect, dealers and lenders will need to modify their contracts, marketing collateral, and F&I scripts accordingly.”
Given the rapidly approaching date, the topic of the arbitration rule should be the focus of meetings between lenders and dealers. We encourage both groups to quickly assess their current position, and put a plan in place to make the necessary modifications. And while lenders and dealers may bristle at the new rule, understand that your customers may be applauding.
The EFG Common Sense Compliance podcasts are a great tool to use during these lender and dealer education sessions. Take 15 minutes to hear some actionable advice — in a language they can understand — and they’ll be one step closer to compliance. And you will have a stronger, compliant dealer partner. For more information on these topics and more, visit www.efgintelligence.com/.
More information about the CFPB’s arbitration rule is available at: https://www.consumerfinance.gov/arbitration-rule/.Like This Post