Following its field hearing on arbitration (see December 10, 2013 Alert), the CFPB released its preliminary research on the use of arbitration clauses in connection with consumer financial products and services. Section 1028 of the Dodd-Frank Act required the CFPB to conduct a study and issue a report on the use of agreements providing for arbitration of any future disputes between consumers and providers of financial products and services. In April 2012, the CFPB launched a public inquiry into how it should study arbitration clauses and agreements between financial service companies and consumers (see May 1, 2012 Alert). In conducting the study, the CFPB reviewed hundreds of consumer contracts as well as filings from the American Arbitration Association—the predominant administrator of consumer financial arbitrations in the markets studied. In particular, the CFPB reviewed AAA filings concerning credit cards, checking accounts, payday loans, and prepaid cards between 2010 and 2012. Based on the results of the study, the CFPB concluded that: (1) larger institutions are more likely to use arbitration clauses; (2) arbitration clauses are more complex than the rest of the contract; (3) roughly 9 out of 10 arbitration clauses expressly bar consumers from filing class arbitration; (4) consumers do not choose arbitration over class action settlements; (5) consumers do not file arbitrations for small-dollar disputes; and (6) few consumers file small claims court actions.
In conjunction with the release of the results of its preliminary research, the CFPB noted its intention to conduct another study to examine other arbitration-related issues, including whether consumers are aware of the terms of arbitration clauses and whether such clauses influence consumers’ decisions about which consumer products to purchase. Of note, the Dodd-Frank Act also gives the CFPB the power to engage in rulemaking on the use of arbitration clauses if it finds that doing so would promote the public interest and protect consumers. The results of this study, as well as the results of the future study, may provide an indication of whether the CFPB plans to issue arbitration-related regulations.
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