The Dodd-Frank Act directed the Consumer Financial Protection Bureau to study the use of pre-dispute arbitration clauses in consumer financial markets and gave the CFPB the power to prohibit or regulate the use of such clauses depending on its findings.
The CFPB conducted a 2012 study and released some preliminary research in December 2013. The industry has been waiting since then for the other shoe to drop. Did anyone just hear a big “kerplop”?
If so, it was probably a copy of the Bureau’s mind-numbing, 728-page report hitting the industry’s doorstep. The report was accompanied by a press release trumpeting the Bureau’s interpretations of the study. According to the Bureau’s release, the report indicates that:
- Tens of millions of consumers are covered by arbitration clauses;
- Consumers filed roughly 600 arbitration cases and 1,200 individual federal lawsuits per year in the markets studied;
- Roughly 32 million consumers are eligible for relief through consumer finance class action settlements each year (it is not clear how this relates to arbitration);
- Arbitration clauses can bar class actions (you’ve really got to love this one — the main reason creditors use arbitration clauses is for the protection they give against class action lawyers — it’s nice for the CFPB to point out the obvious);
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