As expected, and with few changes, the Consumer Financial Protection Bureau adopted its proposed rule barring financial companies regulated by the agency from including class action waivers in arbitration agreements. Arbitration clauses in new contracts offering a consumer financial product or service will need to include specified language indicating that arbitration cannot be used to stop the consumer from pursuing a class action.

After years of companies including class action waivers in their standard agreements, the CFPB’s rule aims to restore consumers’ ability to pursue class actions. The rule, however, only applies to certain consumer agreements, not employment agreements, and federal law already barred the use of arbitration agreements in mortgages.

The rule will likely increase the volume of lawsuits against the financial industry as class action waivers previously required consumers to bring individual claims and may have deterred consumers from pursuing small claims. The rule may limit companies’ appetite for compelling arbitration, or limit arbitration clauses altogether, as defending class actions within arbitration is often fraught with challenges. The new rule may also lead to the industry seeing higher overall litigation budgets and less predictability in terms of exposure to claims for purposes of reserves and quarterly reporting to Wall Street, etc.

We expect the new rule will be challenged, based on the Supreme Court’s rulings in AT&T Mobility, LLC v. Concepcion and American Express, Co. v. Italian Colors, which found such class action waivers enforceable. However, absent a successful challenge in the courts, or action by Congress, the CFPB’s rule will take effect next year, 60 days after its publication in the Federal Register, applying only to new accounts. It will not apply retroactively to existing accounts.

The financial industry should also be wary of a new provision that would create a public online database listing arbitration documents and awards. Currently, there is no federal database that tracks arbitrations. Under the new rule, companies will be forced to submit their claims, awards, and other arbitration information to the CFPB starting in July 2019.

*Winnie Wu contributed to this post.