Preliminary arbitration study results: is the Bureau keeping an open mind?


Following up on our earlier post, we have now had a chance to review the CFPB’s 168-page report containing some preliminary results of its consumer arbitration study. Our responses to some of the Bureau’s specific findings can be accessed here. While we are encouraged that the Bureau recognizes the importance of studying the relative benefits to consumers of individual arbitration when compared with class action litigation, we are concerned that the Bureau has already made up its mind on the need for subsequent rulemaking. Reading between the lines of the report, the Bureau seems to be setting the stage for a rulemaking that will likely not be favorable to the industry. While they claim not to be prejudging the ultimate outcome, their findings seem to be designed to support a conclusion that arbitration is inhibiting consumers from vindicating their rights and that class actions are necessary. That is certainly how the consumerists are viewing things at this point.

Notably, the industry has countered with data of its own. A lengthy report released on December 11 by an affiliate of the U.S. Chamber of Commerce sets forth “strong evidence that class actions provide far less benefit to individual class members than proponents of class actions assert.” It concludes that the vast majority of the class actions it studied “produced no benefits to most members of the putative class” but did enrich the attorneys. The Bureau would be well advised to take this data into account in addition to its own.

Topics:  Arbitration, CFPB, Class Action

Published In: Alternative Dispute Resolution (ADR) 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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