On July 21, 2010 President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) (here). Title X of the Dodd-Frank Act created the Bureau of Consumer Financial Protection (the “Bureau”), which has jurisdiction over consumer contracts for the sale of financial products and services.
Section 1028 of the Dodd-Frank Act directs the Bureau to study mandatory, pre-dispute arbitration in contracts under its jurisdiction and report back to Congress. The agency will then be authorized to either ban or regulate pre-dispute arbitration clauses in contracts under its jurisdiction, provided that the “Bureau finds that such prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers.” The Bureau’s findings must “be consistent” with its study.
Section 921 of the Dodd-Frank Act likewise authorizes the Securities and Exchange Commission (“SEC”) to “prohibit, or impose conditions or limitations on the use of, agreements that require customers or clients of any broker, dealer, or municipal securities dealer to arbitrate any future dispute between them arising under the Federal securities laws, the rules and regulations hereunder, or the rules of a self-regulatory organization if it finds that such prohibition, imposition of conditions, or limitations are in the public interest and for the protection of investors.’’ Section 921 also authorizes the SEC to ban or regulate pre-dispute arbitration in contracts between “customers or clients of any investment adviser.”
In addition, Section 1414 of the Dodd-Frank bans pre-dispute arbitration in residential mortgages and home-equity loans, and Section 922 renders unenforceable pre-dispute agreements to arbitrate whistleblower claims.
