The Equifax Data Breach Might Have Secured the Future of the CFPB’s Mandatory Arbitration Rule
Corporate & Business Law on September 19, 2017
Should consumer finance companies be allowed to use contracts to guard themselves against class-action lawsuits? Before last week, relatively few people outside of the industry felt one way or another.
But on Thursday, the question suddenly became a lot more relevant. On September 7th, Equifax reported that it had suffered a massive data breach: hackers had gained access to the sensitive data of more than 143 million Americans—over half of the U.S. adult population. The stolen information includes individuals’ Social Security numbers, names, home addresses, and even some driver’s license numbers.
Equifax didn’t just drop a bombshell and walk away, of course. To alleviate consumers’ concerns, the credit reporting agency announced it would offer free credit monitoring services. …And then people read the fine print. American Banker reports:
“[K]een observers rapidly figured out that the ‘free’ service came with catch—a mandatory arbitration clauses that would prevent consumers from filing a class action suit against Equifax for using the service. (The arbitration clause would not cover damage from the breach.) The company later changed gears, saying late Friday that customers signing up for the service would not waive the right to a class action suit. But by then the damage was already done.”
What to Know About the Final Rule Before It Goes Into Effect Next Week
For proponents of the Consumer Financial Protection Bureau, disclosure of the breach came at a politically opportune time. The CFPB’s mandatory arbitration rule is set to go into effect later this month. Up until last week, Republicans in Congress hoped to overturn the rule; now, repeal looks unlikely at best. Expect the rule to become effective next Monday, September 18th, with a compliance date of March 19th, 2018. With that in mind, let’s review what we learned about the final rule during our Blueprint for a Modern Compliance Program webinar.
Although the CFPB contends that the rule empowers consumers, the issue isn’t so clear in practice, says Mike:
