Houston Independent Automobile Dealers Association December Issue: Tax Selling Season is Soon Upon Us | Page 10

The CARLAWYER ©
By Thomas B. Hudson and Nicole F. Munro
Here’s our monthly article on legal developments in the auto sales, finance and lease world. This
month, we’re covering actions of the Consumer Financial Protection Bureau, the Federal Trade
Commission, the Justice Department, the Senate, and the President. As usual, this month’s article
features our “Case of the Month.”
Why do we include items from other states? We want to show you legal developments and trends. Also,
another state’s laws might be a lot like your state’s laws. If attorneys general or plaintiffs’ lawyers are
pursuing particular types of claims in other states, those claims might soon appear in your state.

Note that this column does not offer legal advice. Always check with your lawyer to learn how what we
report might apply to you, or if you have questions.
This Month’s CARLAWYER© Compliance Tip

The big news this month, discussed below, is the override of the CFPB’s new arbitration rule. That’s a
real win for dealers who use mandatory arbitration agreements with their car buyers to protect against
class action lawsuits, as well as for those not currently doing so but considering such use in the future.
The CFPB’s anti arbitration campaign has been going on for several years. During that period, many
companies using arbitration agreements have been reluctant to spend legal dollars to keep their
agreements on the cutting edge of the law. After all, why waste money if the CFPB is going to abolish
the use of the agreements? Now that we have an industry victory for arbitration, dealers using such
agreements might want to make sure their agreements reflect the latest legal developments. The “Case
of the Month,” discussed below, illustrates the value of an effective arbitration agreement.
Federal Developments
CFPB’s Arbitration Rule Goes Down in Flames. On October 23, the Treasury Department released a
report examining the CFPB’s arbitration rule, which would have effectively prohibited mandatory
arbitration clauses in consumer financial contracts. The report determined that:
•
the CFPB’s rule would impose extraordinary costs by generating more than 3,000 additional
class action lawsuits over the next five years, imposing more than $500 million in additional legal
defense fees, and transferring $330 million to plaintiffs’ lawyers;
•
the CFPB’s data show that the majority of consumer class actions deliver no relief to the class
members, and few consumers entitled to claim settlement funds actually do;
•
the CFPB failed to consider whether improved arbitration disclosures would serve consumer
interests better than its ban;
•
the CFPB did not adequately assess the share of class actions that are meritless; and
•
the CFPB did not show that its rule will improve financial institutions’ compliance with federal
consumer financial laws.