CFPB Builds its Case Against Arbitration Clauses

INTRODUCTION -

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) mandated a Consumer Financial Protection Bureau (CFPB) study on the use of pre-dispute arbitration clauses in consumer financial products and services with a report of its findings sent to Congress. The Dodd-Frank Act also authorized the CFPB to prohibit or impose conditions or limitations on the use of arbitration clauses if the CFPB determines that it is in the public interest and for the protection of consumers. The CFPB first launched a public inquiry on arbitration clauses in April 2012.

On December 12, 2013, the CFPB published its Arbitration Study Preliminary Results: Section 1028(a) Study Results to Date (Preliminary Results). The CFPB has indicated these results are only an initial portion of the statutorily-mandated report and are subject to revision and further analysis. The CFPB has indicated that its report to Congress will contain additional analyses that the CFPB is planning to conduct but for which CFPB does not yet have preliminary results. The CFPB claims that its Preliminary Results are not indicative of its ultimate assessment; however, its findings bode ill for those exercising their rights under the Federal Arbitration Act. The CFPB seems poised to conclude that consumers are better served by the class action system, despite its well-documented abuses.

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Topics:  Arbitration, CFPB, Dodd-Frank, Mandatory Arbitration Clauses

Published In: Alternative Dispute Resolution (ADR) Updates, General Business Updates, Consumer Protection Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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