The Federal Arbitration Act (FAA), passed in 1925, generally requires courts to look favorably upon all arbitration agreements. In 2011, the Supreme Court upheld an arbitration agreement in a contract for mobile phone services that contained a class action ban. The court ruled that a state law that prevented the class action ban from being enforced was “an obstacle to the accomplishment of the FAA’s objectives.”
However, Congress passed the Dodd-Frank Act in 2010, which authorizes the Consumer Financial Protection Bureau (CFPB) to study arbitration agreements in consumer contracts and limit or prohibit them if doing so would be in the public interest and for the protection of consumers. In May 2016, the CFPB issued a proposed rule that would ban arbitration agreements that acted to prevent class action lawsuits and would further establish certain reporting requirements for other arbitrations that are filed between consumers and providers.
Our experts discussed this proposed rule, including the history that led us to this point and the potential impact it will have if it is finalized.
- Prof. Jason Johnston, Henry L. and Grace Doherty Charitable Foundation Professor of Law, University of Virginia School of Law
- Thaddeus King, Officer, Consumer Banking,The Pew Charitable Trusts