Greg Cook, partner in the firm’s Birmingham office and chair of the Banking & Financial Services Litigation Practice, was quoted in an article by American Banker on August 4, 2017, regarding the possible future of financial institutions if Congress does not strike down the Consumer Financial Protection Bureau’s (CFPB) rule regulating arbitration agreements. The financial services industry has been relying on a Republican-controlled Congress to undo the CFPB’s rule using the Congressional Review Act. If the rule is passed, it is set to go into effect in mid-March 2018.
In the article, Greg discusses some of the compliance headaches financial institutions may face if the rule passes. Institutions will need to weigh whether the benefits of arbitration are worth the costs and risks now that the CFPB will prohibit the use of class action waivers for new customers and new products. Also, while existing contracts with arbitration agreements including class action waivers can remain, institutions will need to assess the costs of the new CFPB reporting requirements for arbitration and need to consider the costs and administrative difficulties of reissuing contracts.