Last week, the Consumer Financial Protection Bureau (CFPB) released its 728-page report on the use of arbitration clauses in consumer financial products and services contracts.  The findings in the report come from a three-year study, which CFPB Director Richard Cordray called “the most comprehensive empirical study of consumer financial arbitration ever conducted.”  In addition to the roughly 1,800 consumer finance arbitration disputes filed between 2010 and 2012, the CFPB reviewed consumer finance cases filed in federal court during the same period as well as 562 consumer finance class-action suits filed in federal and state courts.

While the bureau described the study as “empirical, not evaluative,” the study is expected to lead to proposed rulemaking from the CFPB regarding arbitration clauses and, in particular, those prohibiting class-action suits.  In prepared remarks given in conjunction with the study’s release, Mr. Cordray noted some problematic features of arbitration clauses, including their chilling effect on class actions and their presence in standard-form contracts where the terms are offered on a “take it or leave it” basis.  These remarks may be an indication that change is on the way.  What is clear is that any rule changes are likely to have a widespread effect on consumers due to the prevalence of arbitration clauses.  For example, the study found that, in the credit card market alone, arbitration clauses bind as many as 80 million consumers.

The report is overflowing with statistics but some noteworthy findings include the following:

Many arbitrations involve merely a debt dispute.  The CFPB determined that approximately 40 percent of the arbitrations it reviewed involved only a dispute over a debt that the consumer owed the company. Very few cases involved small claims.   Only approximately eight cases per year involved debt disputes of $1,000 or less, and only 25 cases per year involved affirmative claims of $1,000 or less.  Most arbitration clauses include provisions allowing both the consumer and the company to bring suit in small-claims court.

The CFPB seems to be particularly concerned with the chilling impact arbitration clauses may have on class actions.  The backdrop to this concern is the Supreme Court’s decision in 2011 in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), which held that the Federal Arbitration Act of 1925 preempted state law prohibiting the enforcement of arbitration provisions preventing class actions.  Several of the study’s noteworthy findings regarding arbitration and class actions include the following:

 Arbitration clauses were rarely invoked to force a single lawsuit into arbitration but they were commonly used to block class actions.  In class actions against credit card issuers, for example, arbitration clauses were invoked to block class actions in approximately two-thirds of all cases. Although it is possible for arbitrations to be conducted on a class basis, nearly all arbitration clauses reviewed included a provision preventing arbitration of disputes on a class basis and requiring consumers to proceed individually. Most consumers interviewed in the study mistakenly believed they could participate in class actions for disputes arising out of credit card contracts.

In the short run, it appears that the CFPB’s plan is to allow time for the study’s findings to be digested.  In his prepared remarks, Mr. Cordray stated that the CFPB will “begin meeting with stakeholders after they have had a chance to read our report.”  Nevertheless, it seems nearly certain that the CFPB will attempt to restrict the use of arbitration requirements in consumer contracts.  And, given the attention that the report has already received and the stakes involved for companies dealing directly with consumers, there is certain to be opposition from companies who are repeat defendants in consumer disputes.