Last Tuesday, the Consumer Financial Protection Bureau submitted to the Federal Register for publication a "Request for Information Regarding Scope, Methods, and Data Sources for Conducting Study of Pre-Dispute Arbitration Agreements." Section 1028(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Bureau to conduct such a study and report to Congress without imposing a deadline for such study or report. The "Request" is a preliminary step in undertaking the study.
Somewhat ominously, Section 1028(b) authorizes the Bureau, by regulation, to prohibit or impose conditions or limitations on the use of pre-dispute arbitration agreements if, consistent with the study, the Bureau finds that such a prohibition or imposition of conditions or limitations "is in the public interest and for the protection of consumers." Any such regulation is to have a 180-day delayed effective date.
Tuesday's Request asks the public to submit comments by June 23, 2012 on three subjects related to the scope, methodology, and data sources of the study:
- The prevalence of pre-dispute arbitration agreements in consumer financial services products other than credit card agreements (as to which the Bureau already has data because most credit card issuers file with the Bureau copies of their consumer credit card agreements),
- Claims brought by and against consumers in arbitration, and
- The impact of pre-dispute arbitration agreements on consumers other than in particular arbitration proceedings.
This last category reflects a recognition by the Bureau that the existence of pre-dispute arbitration agreements may impact the price and availability of financial services products to consumers, as well as the incidence and nature of consumer claims, compliance with laws, consumer awareness, and even development of the rule of law. The Request asks whether the Bureau should evaluate these impacts and, if so, what methods of study it should use and what new data it should seek and from where.
Earlier empirical studies have indicated that consumers prefer arbitration to the court system and fare better in arbitration than under the court system. However, a 2007 study reached different conclusions. The fact that findings in past studies conflict suggests the practical desirability of the Bureau conducting its own study.
Last year, the U. S. Supreme Court held, in AT&T Mobility v. Concepcion, that a state law which deemed waivers, in pre-dispute arbitration agreements, of the right to file a class action to be unenforceable was preempted by the Federal Arbitration Act. That Act expressly provides that such agreements to arbitrate are to be "valid, irrevocable, and enforceable." That Act has been public policy for at least 65 years. The Bureau's Request does not mention class actions or the Concepcion case.
The Bureau expressed an interest, at this time, in sources of data and methods of study and not whether it should prohibit or impose conditions or limitations on arbitration clauses. Since the responses to the Request may affect the eventual study, and since the study may serve as the basis for adoption of regulations prohibiting, conditioning, or limiting pre-dispute arbitration clauses, supporters of such clauses would be wise to weigh in by June 23 with the Bureau.