CFPB Launches Public Inquiry into Arbitration Clauses
Bureau to explore arbitration’s effects on consumers
On Nov. 1, 2017, the President signed a joint resolution passed by Congress disapproving the Arbitration Agreements Rule under the Congressional Review Act (CRA). Pursuant to the joint resolution, the Arbitration Agreements Rule has no force or effect. On Nov. 22, 2017, the Bureau published a notice removing the Arbitration Agreements Rule from the Code of Federal Regulations. The materials relating to the Arbitration Agreements Rule on the Bureau’s website are for reference only.
WASHINGTON, D.C. Today, the Consumer Financial Protection Bureau (CFPB) launched a public inquiry into how consumers and financial services companies are affected by arbitration and arbitration clauses.
“Arbitration clauses are found in many contracts for consumer financial products,” said CFPB Director Richard Cordray. “We want to learn how arbitration clauses affect consumers, and how effective arbitration is in resolving consumers’ issues. This inquiry will help the Bureau assess whether rules are needed to protect consumers.”
Arbitration is a way to resolve disputes outside the court system. Many contracts for consumer financial services products and services contain a “pre-dispute arbitration clause” stating that the parties generally agree to resolve all disputes about that product or service through arbitration, rather than through the court system. Through the Dodd-Frank Act, Congress requires the CFPB to study the use of pre-dispute arbitration clauses in consumer financial markets and gives the Bureau the power to issue regulations for the protection of consumers consistent with the study.
For purposes of conducting the study, the Bureau is asking the public about:
- The prevalence of arbitration clauses in consumer financial products and services;
- What claims consumers bring in arbitration against financial services companies;
- If claims are brought by financial services companies against consumers in arbitration;
- How consumers and companies are affected by actual arbitrations; and
- How consumers and companies are affected by arbitration clauses outside of actual arbitrations.
Companies that use pre-dispute arbitration clauses claim that arbitration is faster and cheaper than litigation, and at least as fair. Others disagree, noting that consumers may not realize that they have waived their right to a trial because of an arbitration clause. And even if consumers understand arbitration clauses, these clauses may still have significant impacts that warrant study by the CFPB.
Comments on the Request for Information must be submitted by June 23, 2012. After the Bureau completes its study, it will assess whether imposing conditions or prohibitions on arbitration clauses would better protect consumers and serve the public interest.
The Request for Information on Arbitration, as submitted to the Federal Register for publication, is available at: https://files.consumerfinance.gov/f/201204_cfpb_rfi_predispute-arbitration-agreements.pdf