NMP - August 2017 - 77

take-it-or-leave-it arbitration

Notice I did not indicate that
arbitration clauses are themselves
banned. That is because the rule
does not ban arbitration clauses!
Companies can still work out
binding legal settlements with
consumers by means of arbitrators
paid for by the company.
A new arbitration rule
This new Arbitration Rule (Rule)
prohibits the use of mandatory

"We agree that neither we nor
anyone else will rely on this
agreement to stop you from being
part of a class action case in court.
You may file a class action in court
or you may be a member of a class
action filed by someone else."3
If an arbitration clause applies
to several products or services,
only some of which are covered by
the Arbitration Rule, then the
language must specify that the
same language applies to conduct
covered by the Rule.4
The Rule also requires
companies that include arbitration
clauses in consumer financial
products and services contracts to
produce certain records to the
Bureau.5 These records include (1)
claims, counterclaims, answers,
arbitration agreements, judgments
or awards, and dismissals
concerning arbitration claims filed;
(2) communications with
arbitrators concerning a
determination that an arbitration
agreement "does not comply with
the administrator's fairness
principles [or] rules;" and (3) court
filings that rely on arbitration
agreements in support of a
company's request for dismissal,
deferral or stay, and the arbitration
agreement relied upon.6
In its announcement of the
release of the final Rule, the CFPB
stated that "gathering these
materials will enable the CFPB to
better understand and monitor
arbitration, including whether the
process itself is fair."7
The Rule makes changes to the
arbitration process by forcing
companies to submit information
about individual cases to the
Bureau that would be published
on the Bureau's Web site. I have a
hunch that this is the point where
the seething fire in the dragon
slayer's belly rises brazenly,
frantically, commencing with the
ruminations of thought-distracting
continued on page 78

A Message From MAA Chairman Gene M. Lugat
ith the August recess looming, members of
Congress are preparing to head home to
their states and districts. It's a perfect time
for members of the Mortgage Action
Alliance (MAA) to engage with your elected
representatives. The MAA is a non-partisan
and free nationwide grassroots lobbying network of real estate
finance industry professionals, affiliated with the Mortgage
Bankers Association (MBA) that allows our industry to speak
with elected officials with one voice. If you aren't an MAA
member, you can join for free at MBA.org/JoinMAA.
This summer, the Mortgage Bankers Association (MBA)
capped off another successful National Advocacy Conference
(NAC), with more than 365 attendees from 43 states. NAC is an
annual opportunity for mortgage professionals from across the
country to engage their elected officials face to face, and this
year, industry advocates were able to attend 225 meetings on
Capitol Hill. Couldn't make it to Washington? At NAC, MBA
announced the launch of the MAA App.
The MAA App is designed to make standing up for the real
estate finance industry easier than ever. On the App, you can:

W

l Receive updates on bills affecting the real estate finance
industry
l Let your elected officials know how those bills will impact
you directly
l Research bills that MBA is watching
l Find contact information for your members of Congress
l Join MAA
l Learn about MORPAC, MBA's political action committee
To download the app, visit MBA.org/MAAApp or search for
"Mortgage Action Alliance" in the App Store or Google Play.
With members of Congress returning to their states and
districts, August is a perfect time to reach out to your elected
officials. Visit Action.MBA.org to look up your elected officials
and view a list of current calls to action. Current Calls to Action
include a Call to Action in support of HR 2948, the SAFE
Transitional Licensing Act, which would provide a temporary
license for loan originators transitioning between federallyinsured depositories and non-depositories, as well as across
state lines.
Whether you come to Washington for the NAC, talk to your
members of Congress in your home district, or take action
using the App, your voice matters. MAA is working hard to
make it easy to take action-and your elected officials need to
hear from you.

Gene M. Lugat is chairman of the Mortgage Bankers
Association's Mortgage Action Alliance. Gene is
executive vice president, national industry and political
relations for PrimeLending Inc.

77

n National Mortgage Professional Magazine n AUGUST 2017

"Arbitration clauses in contracts
for products like bank accounts
and credit cards make it nearly
impossible for people to take
companies to court when things
go wrong. These clauses allow
companies to avoid accountability
by blocking group lawsuits and
forcing people to go it alone or
give up."2

arbitration clauses in consumer
financial products and services
contracts to prohibit class action
lawsuits. However, financial
institutions can still include
arbitration clauses, but these
clauses cannot be used to stop
consumers from filing class
actions. So, if companies want to
include an arbitration clause in a
consumer contract, the Rule
requires that the clause
incorporate the following
language:

MBA's
Mortgage
Action
Alliance

NationalMortgageProfessional.com

pointing out that individuals are
unlikely to be able to handle the
costs of arbitration to resolve what
are typically low dollar value
cases. Their position is that if
consumers were able to band
together and file class action
lawsuits, consumers would be
more apt to challenge allegedly
unlawful conduct against financial
institutions, and companies would
be held accountable.
The Bureau's position is really
rather simple: It notes the
incontrovertible fact that
mandatory arbitration clauses that
ban class action litigation happen
to stop consumers from seeking
judicial remedies in disputes over
small fines and other charges.
Let's call this kind of arbitration
clause the "Take-It-or-Leave-It"
clause.
Put another way, many
consumers are unable to pursue
small dollar settlements disputes,
given the not erroneous belief that
the payout would not be worth the
trouble. So, the Bureau contends,
not incorrectly, that allowing
companies to use the Take-It-orLeave-It clause enables them to
wrong consumers, but face no
consequences for doing so.
Under the final rule, the
companies would no longer be
allowed to put the Take-It-orLeave-It clause in their arbitration
provisions. The result of this rule,
then, would be to put consumers
into the position of banding
together in group lawsuits,
consisting of fellow sufferers with
similar legal concerns.
To quote the Bureau's Director
Richard Cordray, the fire-breathing
top dragon mounty himself:

continued from page 55


http://www.MBA.org/JoinMAA http://www.MBA.org/MAAApp http://Action.MBA.org

Table of Contents for the Digital Edition of NMP - August 2017

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