Cause of Action Institute filed a lawsuit Tuesday afternoon in the U.S. District Court of the District of Columbia to urge the Consumer Financial Protection Bureau (CFPB) to provide transparency in the formatting of its recent rule to prohibit the use of mandatory binding arbitration clauses in financial services contracts.
When one signs a contract with a mandatory binding arbitration clause, it means the signatory agrees to resolve any disputes about the contract before an arbitrator instead of a court.
Cause of Action issued a Freedom of Information Act (FOIA) request for records that would show how the agency conducted its study ultimately leading to its decision in April, 2016. The CFPB refused to release the records in September, issuing a final determination that it would withhold 1,877 pages of responsive records.
The lawsuit claims that the CFPB made a final determination to prohibit the use of mandatory and binding pre-dispute arbitration clauses in financial services contracts, but did so without providing records outlining its rationale for the decision. Cause of Action is arguing that the CFPB is required to release all records not covered by a valid exemption.
“To issue a regulation affecting such a vast swath of the economy, and then attempt to conceal the bulk of the documents reflecting how that decision was made from public view, violates the law and the American people’s right to know,” says John Vecchione, vice president of Cause of Action.
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