On May 18, 2016, the House Financial Services Committee’s Subcommittee on Financial Institutions and Consumer Credit will hold a hearing entitled “Examining the CFPB’s Proposed Rulemaking on Arbitration: Is it in the Public Interest and for the Protection of Consumers?”
On May 5, 2016, the CFPB issued a proposed rule that would prohibit covered providers of certain consumer financial products and services from using pre-dispute arbitration agreements that contain a class action waiver. The proposed rule followed the CFPB’s study of consumer arbitration mandated by Section 1028 of the Dodd-Frank Act. As the Committee Memorandum notes, Section 1028 authorizes the CFPB to limit the use of consumer arbitration agreements only if, consistent with its study, it finds that doing so “is in the public interest and for the protection of consumers.” Our analysis showed that, despite the CFPB’s claims that the study demonstrated that arbitration agreements are detrimental to consumers, the study’s data, in reality, confirmed that arbitration is a faster, less expensive, and far more effective way for consumers to resolve disputes with companies than class action litigation.
The witnesses at the hearing will be:
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Professor Jason S. Johnston, Henry L. and Grace Doherty Charitable Foundation Professor of Law, University of Virginia School of Law
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Dong Hong, VP and Regulatory Counsel, Consumer Bankers Association
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Andrew Pincus, Partner, Mayer Brown LLP, on behalf of the U.S. Chamber of Commerce
While no other witnesses are listed on the Committee website, we would find it surprising if no consumer advocates appear as witnesses.
The CFPB announced its release of the proposal at a field hearing on arbitration in Albuquerque, New Mexico held on May 5. Alan Kaplinsky, who leads Ballard Spahr’s Consumer Financial Services Group, was invited by the CFPB to attend the field hearing to present the financial services industry’s position on the proposed regulations.
