Industry trade groups urge OMB not to approve CFPB arbitration telephone survey

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Three prominent industry trade groups are urging the Office of Management and Budget (OMB) not to approve the CFPB’s proposal to conduct a national telephone survey of 1,000 credit card holders as part of its study of the use of mandatory arbitration agreements in connection with the offering of consumer financial products and services.

After releasing its initial proposed survey in June 2013, the CFPB revised the proposed survey in May 2014 based on the comments it received on the initial survey.  In its Federal Register notice announcing the revised survey, the CFPB indicated that the survey was intended to explore: (a) the role of dispute resolution provisions in consumer card acquisition decisions, and (b) consumers’ default assumptions (meaning consumers’ awareness, understanding, or knowledge without supplementation from external sources) regarding their dispute resolution rights vis-à-vis their credit card issuers, including their awareness of their ability, where applicable, to opt-out of mandatory pre-dispute arbitration agreements.

While noting their appreciation of the CFPB’s efforts to incorporate the comments it received on its initial proposed survey, the American Bankers Association, the Consumer Bankers Association and the Financial Services Roundtable (Associations) state in their comment letter that they “strongly recommend that OMB not approve the [revised] proposal because it will not produce information of practical utility, remains materially flawed, and is inconsistent with the statutory mandate.” The CFPB’s arbitration study is mandated by Section 1028 of the Dodd-Frank Act, which authorizes the CFPB to “prohibit or impose conditions or limitations on the use of” mandatory arbitration agreements if it finds that doing so is “in the public interest and for the protection of consumers.”

According to the Associations, for responses to the proposed survey to be meaningful, the CFPB must obtain other information that cannot be reliably obtained through a telephone survey. Examples of such other information given by the Associations are the reasons people may not be aware of their dispute resolution rights, the reasons such rights are not a factor in choosing a credit card, and consumer dispute resolution preferences. The Associations assert that such reasons and preferences are materially important to the policy consideration of whether use of mandatory arbitration would be “in the public interest and for the protection of consumers” and without such information, the CFPB’s analysis will lack the factual basis “required to consider how consumers are or would be affected and the public interest best served.” They further assert that because of its flaws, the proposed survey does not satisfy the standard for OMB approval which requires OMB to consider whether an agency’s proposed information collection “is necessary for the performance of the functions of the agency, including whether the information shall have practical utility….”

The Associations recommend that the CFPB spend its resources on obtaining more useful and complete information through other means, such as consumer focus groups. While asserting that the proposed survey is fundamentally inadequate, the Associations also suggest improvements to the survey. 

In April 2012, the CFPB published a request for information about the scope, methodology and data sources for the study. In December 2013, the CFPB published preliminary study results. This past April, at the 19th Annual Consumer Financial Services Institute in Chicago (which I co-chaired), Will Wade-Gery (who is managing the study for the CFPB) indicated that the study will be completed by the end of this year.

 

Topics:  Arbitration, CFPB, Consumer Financial Products, Credit Cards, Mandatory Arbitration Clauses, OMB, Surveys, Trade Associations

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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