July 1 is quickly approaching for institutions that require students to sign pre-dispute arbitration agreements. The new Borrower Defense to Repayment (BDR) regulation goes into effect on July 1. Among other things, it prohibits Title IV institutions from requiring students to sign mandatory pre-dispute arbitration agreements covering BDR claims.
Institutions can continue to use arbitration agreements for non-BDR claims. Institutions should review current arbitration agreements to ensure they comply with the new regulation. Additionally, institutions must provide notice (with prescribed language) to students who previously signed a pre-dispute arbitration agreement that does not comply with the new regulations. The notice must be provided no later than exit counseling or the date on which the school files its initial response to a demand for arbitration or service of a complaint, whichever is earlier.
Compliant arbitration agreements and notices must be implemented by July 1. Some arbitration administrators, such as the American Arbitration Association, required consumer arbitration agreements to be registered with the agency. Such administrators may decline to administer an arbitration if the college or business does not comply with the registration requirement. Institutions should review their arbitration administrator's rules to see if this is required.
Finally, litigation is pending in the case of CCST v. Cardoza, which may impact whether the new BDR regulation goes into effect as scheduled. Institutions should be on the watch for updates in the event that the court issues a ruling that impacts the implementation of the new rule.
If you have any questions about this blog post, please contact Edward Cramp, Jessica High, any of the attorneys in our Higher Education Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
