Posted by : Timothy Brogan
The Consumer Financial Protection Bureau is set to begin examining the use of mandatory arbitration on a number of financial products, including payday loans.
Mandatory arbitration clauses sometimes included in payday loans require a consumer to settle any disputes with a lender directly with the company rather than through the judicial system. The CFPB recently announced it plans to examine the practice to see the impact it has on Americans who utilize these services.
"We want to learn how arbitration clauses affect consumers, and how effective arbitration is in resolving consumers' issues," said CFPB Director Richard Cordray. "This inquiry will help the Bureau assess whether rules are needed."
No Timeline On Results
The CFPB did not say exactly when it would finalize plans to study mandatory arbitration, which is required as part of the Dodd-Frank Act. However, under the law, the agency has the right to enact any regulation it deems fit.
In the meantime, lenders who utilize mandatory arbitration claim the process is cheaper and more streamlined that going through the judicial process.