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Federal Register / Vol 33210 Federal Register / Vol. 82, No. 137 / Wednesday, July 19, 2017 / Rules and Regulations BUREAU OF CONSUMER FINANCIAL agreements that provide for the collects on its Web site with appropriate PROTECTION arbitration of any future disputes redactions as warranted, to provide between consumers and providers of greater transparency into the arbitration 12 CFR Part 1040 certain consumer financial products and of consumer disputes. [Docket No. CFPB–2016–0020] services. The final rule applies to providers of Congress directed the Bureau to study certain consumer financial products and RIN 3170–AA51 these pre-dispute arbitration agreements services in the core consumer financial in the Dodd-Frank Wall Street Reform markets of lending money, storing Arbitration Agreements and Consumer Protection Act (Dodd- money, and moving or exchanging 2 AGENCY: Bureau of Consumer Financial Frank or Dodd-Frank Act). In 2015, the money, including, subject to certain Protection. Bureau published and delivered to exclusions specified in the rule, Congress a study of arbitration (Study).3 ACTION: Final rule; official providers that are engaged in: In the Dodd-Frank Act, Congress also • interpretations. Extending consumer credit, authorized the Bureau, after completing participating in consumer credit SUMMARY: Pursuant to section 1028(b) of the Study, to issue regulations decisions, or referring or selecting the Dodd-Frank Wall Street Reform and restricting or prohibiting the use of creditors for non-incidental consumer Consumer Protection Act, the Bureau of arbitration agreements if the Bureau credit, each when done by a creditor Consumer Financial Protection (Bureau) found that such rules would be in the under Regulation B implementing the is issuing this final rule to regulate public interest and for the protection of Equal Credit Opportunity Act (ECOA), arbitration agreements in contracts for consumers.4 Congress also required that acquiring or selling consumer credit, specified consumer financial product the findings in any such rule be and servicing an extension of consumer and services. First, the final rule consistent with the Bureau’s Study.5 In credit; prohibits covered providers of certain accordance with this authority, the final • extending or brokering automobile consumer financial products and rule issued today imposes two sets of leases as defined in Bureau regulation; services from using an agreement with limitations on the use of pre-dispute • providing services to assist with a consumer that provides for arbitration arbitration agreements by covered debt management or debt settlement, to of any future dispute between the providers of consumer financial modify the terms of any extension of parties to bar the consumer from filing products and services. First, the final consumer credit, or to avoid foreclosure, or participating in a class action rule prohibits providers from using a and providing products or services concerning the covered consumer pre-dispute arbitration agreement to represented to remove derogatory financial product or service. Second, the block consumer class actions in court information from, or to improve, a final rule requires covered providers and requires most providers to insert person’s credit history, credit record, or that are involved in an arbitration language into their arbitration credit rating; pursuant to a pre-dispute arbitration agreements reflecting this limitation. • providing directly to a consumer a agreement to submit specified arbitral This final rule is based on the Bureau’s consumer report as defined in the Fair records to the Bureau and also to submit findings—which are consistent with the Credit Reporting Act (FCRA), a credit specified court records. The Bureau is Study—that pre-dispute arbitration score, or other information specific to a also adopting official interpretations to agreements are being widely used to consumer derived from a consumer file, the regulation. prevent consumers from seeking relief except for certain exempted adverse from legal violations on a class basis, DATES: Effective date: This regulation is action notices (such as those provided and that consumers rarely file effective September 18, 2017. by employers); Compliance date: Mandatory individual lawsuits or arbitration cases • providing accounts under the Truth compliance for pre-dispute arbitration to obtain such relief. in Savings Act (TISA) and accounts and Second, the final rule requires agreements entered into on or after remittance transfers subject to the providers that use pre-dispute March 19, 2018. Electronic Fund Transfer Act (EFTA); arbitration agreements to submit certain • FOR FURTHER INFORMATION CONTACT: transmitting or exchanging funds records relating to arbitral and court (except when necessary to another Benjamin Cady and Lawrence Lee proceedings to the Bureau. The Bureau Counsels; Owen Bonheimer, Eric product or service not covered by this will use the information it collects to rule offered or provided by the person Goldberg and Nora Rigby Senior continue monitoring arbitral and court Counsels, Office of Regulations, transmitting or exchanging funds), proceedings to determine whether there certain other payment processing Consumer Financial Protection Bureau, are developments that raise consumer _ services, and check cashing, check at 202–435–7700 or cfpb reginquiries@ protection concerns that may warrant cfpb.gov. collection, or check guaranty services further Bureau action. The Bureau is consistent with the Dodd-Frank Act; SUPPLEMENTARY INFORMATION: also finalizing provisions that will and require it to publish the materials it I. Summary of the Final Rule • collecting debt arising from any of the above products or services by a On May 24, 2016, the Bureau of 2 Public Law 111–203, 124 Stat. 1376 (2010), provider of any of the above products or Consumer Financial Protection section 1028(a). 3 services, their affiliates, an acquirer or published a proposal to establish 12 Bureau of Consumer Fin. Prot., ‘‘Arbitration Study: Report to Congress, Pursuant to Dodd-Frank purchaser of consumer credit, or a CFR part 1040 to address certain aspects Wall Street Reform and Consumer Protection Act person acting on behalf of any of these of consumer finance dispute § 1028(a),’’ (2015), available at http:// persons, or by a debt collector as resolution.1 Following a public files.consumerfinance.gov/f/201503_cfpb_ defined by the Fair Debt Collection comment period and review of arbitration-study-report-to-congress-2015.pdf. Specific portions of the Study are cited in this final Practices Act (FDCPA). comments received, the Bureau is now rule where relevant, and the entire Study will be Consistent with the Dodd-Frank Act, issuing a final rule governing included in the docket for this rulemaking at www.regulations.gov. the final rule applies only to agreements 1 Arbitration Agreements, 81 FR 32830 (May 24, 4 Dodd-Frank section 1028(b). entered into after the end of the 180-day 2016). 5 Id. period beginning on the regulation’s VerDate Sep<11>2014 19:04 Jul 18, 2017 Jkt 241001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\19JYR2.SGM 19JYR2 mstockstill on DSK30JT082PROD with RULES2 Federal Register / Vol. 82, No. 137 / Wednesday, July 19, 2017 / Rules and Regulations 33211 effective date.6 The Bureau is adopting mechanism, and whether arbitration and their increasing use in markets for an effective date of 60 days after the agreements effectively discourage and consumer financial products and final rule is published in the Federal limit the filing or resolution of certain services. Register. To facilitate implementation claims in court or in arbitration. A. Consumer Rights Under Federal and and ensure compliance, the final rule In recent years, Congress has taken State Laws Governing Consumer requires providers in most cases to steps to restrict the use of arbitration Financial Products and Services insert specified language into their agreements in connection with certain arbitration agreements to explain the consumer financial products and Companies typically provide effect of the rule. The final rule also services and other consumer and consumer financial products and permits providers of general-purpose investor relationships. Most recently, in services under the terms of a written reloadable prepaid cards to continue the 2010 Dodd-Frank Act, Congress contract. In addition to being governed selling packages that contain non- prohibited the use of arbitration by such contracts and the relevant compliant arbitration agreements, if agreements in connection with mortgage State’s contract law, the relationship they give consumers a compliant loans,11 authorized the Securities and between a consumer and a financial agreement as soon as consumers register Exchange Commission (SEC) to regulate service provider is typically governed their cards and the providers comply arbitration agreements in contracts by consumer protection laws at the State with the final rule’s requirement not to between consumers and securities level, Federal level, or both, as well as use an arbitration agreement to block a broker-dealers and investment by other State laws of general class action. advisers,12 and prohibited the use of applicability (such as tort law). arbitration agreements in connection Collectively, these laws create legal II. Background with certain whistleblower rights for consumers and impose duties Arbitration is a dispute resolution proceedings.13 on the providers of financial products process in which the parties
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