On October 7, the Consumer Financial Protection Bureau (CFPB) announced that it is considering two rulemaking proposals that would severely limit the use of pre-dispute arbitration clauses in consumer financial service contacts. Ignoring the well-documented problems and abuses associated with class action litigation, the Bureau has concluded that because class actions effect a greater aggregate transfer of wealth from alleged “wrongdoers” to plaintiffs’ class action lawyers and plaintiff classes than does arbitration, it is in the public interest and for the benefit of consumers to eliminate arbitration clauses that would limit its use. The Bureau has also concluded, as it must under the Dodd-Frank Act, that imposing such limitations by regulation would be consistent with its recent Report to Congress.

BACKGROUND -

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) mandated a 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.