CFPB: Attack on predispute arbitration agreements

CFPB: Attack on predispute arbitration agreements

Another assault by the Consumer Protection Bureau on dealers is in the realm of predispute arbitration agreements. The Legal Briefing Panel said the Dodd-Frank Act empowers the CFPB to regulate arbitration, and the agency has decided to go after arbitration agreements that waive the consumerês right to join a class action suit. Many Maryland dealers added those agreements to their sales contracts a few years ago after a rash of class action suits in the state came forward.

The CFPB has proposed a regulation to prohibit finance and lease sources from including class action waivers in predispute arbitration provisions. Although the CFPB cannot directly regulate dealers, indemnification clauses in indirect finance and lease agreements could impose staggering losses from class action on dealers, said Charapp.

NADA cannot fight the CFPB on this regulation because 10 years ago, it protested automakersê inclusion of an arbitration agreement as part of the franchise agreement. WANADA is part of a group of state and metro associations protesting the CFPB regulation. Comments are due by August 22, 2016. The rule will likely take effect in spring 2017 barring a legal challenge.