Earlier today in Newark, New Jersey, the CFPB hosted a field hearing on consumer arbitration. In Section 1028 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Congress directed the CFPB to conduct a study and report to Congress on pre-dispute arbitration clauses in consumer contracts.
This morning, the CFPB released its 728-page report. The press release headline accompanying the report succinctly states the CFPB’s conclusion—“CFPB Study Finds that Arbitration Agreements Limit Relief for Consumers.” The CFPB focused on arbitration clauses in six consumer finance markets: credit cards, checking accounts, prepaid cards, payday loans, private student loans, and mobile wireless contracts.
To highlight three key findings from the report: (1) Arbitration clauses limit class action lawsuits; (2) There is no evidence that arbitration clauses lead to lower prices for consumers; and (3) Most consumers do not know that they are subject to arbitration clauses and those who do may not fully understand the limitations.
In Director Richard Cordray’s prepared remarks, he characterizes the report as “the most comprehensive empirical study of consumer financial arbitration ever conducted.” Director Cordray further explained that the purpose of this process is “to provide the basis for important policy decisions that the Consumer Bureau will have to make in this area,” and he pledged that the CFPB “will be meeting with stakeholders after they have had a chance to read our report.”
It is clear that there will be more to come from the CFPB regarding consumer arbitration.