On April 24, 2012, the Consumer Financial Protection Bureau (CFPB) released a notice of public inquiry into "how consumers and financial services companies are affected by arbitration and arbitration clauses." The stated purpose of the inquiry is to help the CFPB identify what the scope, method and sources of data should be as it conducts a study of the use of arbitration and pre-dispute arbitration clauses in consumer financial markets. After the CFPB concludes this study, it "will assess whether imposing conditions or prohibitions on arbitration clauses would better protect consumers and serve the public interest."
Section 1028(a) of the Dodd-Frank Act requires the CFPB to "conduct a study of" and "provide a report to Congress concerning" the use of pre-dispute arbitration agreements between "covered persons" and consumers in connection with the provision of consumer financial products or services. Section 1028(b) of the Act grants the CFPB "further authority"—broad rulemaking authority—to restrict or prohibit arbitration agreements if it finds that doing so "is in the public interest and for the protection of consumers." In CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 672 (2012), the Supreme Court specifically identified this CFPB authority as the type of clear congressional statement that would nullify arbitration agreements otherwise protected by the Federal Arbitration Act.
Both the study itself, and any subsequent rulemaking proceeding, could affect a broad range of businesses—any provider of "consumer financial products or services" under the Act. The definition of "financial product or service," which drives coverage under the Act, is truly byzantine and could be read to apply to a host of entities that provide post-paid goods and services. The use of agencies for "credit checks" or "debt collection" may well result in coverage under the Act. In fact, the specific exclusions for the "business of insurance" and "electronic conduit services" only reinforces the potential breadth of the primary definition itself.
Any negative pronouncement by the CFPB regarding individual arbitration will undoubtedly be used by opponents of arbitration in Congress and in the federal and state courts. Thus, any retail-facing business that relies upon individual arbitration clauses in product or service agreements has an interest in the outcome of the study and the eventual rulemaking proceedings.
Any business wishing to submit comments to the CFPB regarding this inquiry must do so by June 23, 2012.