On July 13, the American Bankers Association, the Consumer Bankers Association, and The Financial Services Roundtable submitted a comment letter to the Consumer Financial Protection Bureau in response to the CFPB's March 10, 2015 Consumer Arbitration Study.
This Arbitration Study has been widely viewed as potentially laying the groundwork for the abolition of mandatory consumer arbitration agreements because the CFPB concluded that there are problems with pre-dispute arbitration clauses in credit card, bank account, and other consumer finance contracts.
Pursuant to Section 1028(b) of the Dodd-Frank Act, the CFPB may prohibit, condition, or limit the use of arbitration provisions in consumer financial services agreements if it finds that doing so is "in the public interest and for the protection of consumers." These trade groups informed the CFPB of their view that the Arbitration Study of mandatory pre-dispute arbitration agreements shows that arbitration has "significant, demonstrable benefits over litigation in general and class action litigation in particular,"and thus the Dodd-Frank Act would not permit rulemaking prohibiting such agreements.
The groups added that if the CFPB were to over-regulate arbitration agreements, companies would be likely to discontinue their use, thus depriving consumers of a "valuable and time-tested procedure for economically, expeditiously, conveniently, and efficiently resolving individual customer disputes."
The comment letter requests the CFPB to solicit public comment on the Arbitration Study so that all interested stakeholders will have an opportunity to express their views on the importation issues presented and to amplify the record of information available before the CFPB decides whether to initiate a rulemaking. Also, these associations urged the CFPB to conduct additional research before proposing any regulation, including research about customer satisfaction with arbitration and "whether the creation of the bureau and its own regulatory, enforcement and supervisory activities are supplanting what consumer activists contend are the main justification for class actions."
As we previously discussed, in November 2014, a group of 16 state attorneys general wrote a letter to Richard Cordray, head of the CFPB, encouraging the CFPB to crack down on pre-dispute mandatory arbitration clauses in consumer agreements for financial products or services. As noted here and here, there have been numerous instances of coordinated, aggressive efforts by state attorneys general and the CFPB to reform the financial services industry since the passage of the Dodd-Frank Act.
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