CFPB Proposed Arbitration Study Receives Criticism from Industry and Consumer Groups

CFPB Proposed Arbitration Study Receives Criticism from Industry and Consumer Groups

 by Lauren E. Quigley

In June 2013, the CFPB put credit card issuers and servicers on notice that it was planning to investigate consumer experience with mandatory arbitration agreements. With the proposed survey, the CFPB planned to elicit feedback regarding the effect of dispute resolution provisions on consumer choice of credit cards and consumers’ default assumptions regarding their dispute resolution rights, including their awareness, understanding, and valuation of certain resolution options. The information would be gathered through a telephone survey of 1,000 credit card holders. Dodd-Frank Act section 1028 mandates the CFPB conduct an arbitration study and the finding could result in new and far-reaching regulation of consumer financial products. The CFPB is authorized to regulate the use of dispute resolution agreements in the context of consumer financial products and services. Based on public comments, a revised proposed survey was published in May 2014.

In response to the revised survey, three major consumer finance industry groups filed a joint comment in opposition. The American Bankers Association, the Consumer Bankers Association, and the Financial Services Roundtable advise that this survey will not result in useful data. The Associations argue that for the data to be meaningful, the survey must include the collection of certain “critical” information that cannot be reliably obtained over the phone. They also claim that the survey seeks to collect information “about which there is little debate or disagreement and which may be supported by other accessible information.” Instead of the proposed survey, the Associations recommend a different information-gathering medium, such as consumer focus groups.

Comments submitted by consumer advocate groups tended to focus on the need for heightened consumer education and awareness regarding mandatory arbitration clauses. Citing recent Supreme Court cases upholding the enforceability of mandatory arbitration clauses, these groups argued the importance of gathering information regarding consumer ignorance in order to demonstrate the necessity of a rule regulating these clauses.

The time for public comments on the revised proposed study closed June 30, 2014.  The CFPB expects the study to be completed by the end of the year.

 Read more articles about the Consumer Financial Protection Bureau at Dykema’s CFPB Blog

For more information about LexisNexis products and solutions, please connect with us through our corporate site.