Early in 2015, the Consumer Finance Protection Board submitted a report to Congress in response to their request, “to study ‘the use of agreements providing for arbitration of any future dispute . . . in connection with the offering or providing of consumer financial products or services,'”. Now, just over a year later, the CFPB has called for a field hearing on arbitration in Albuquerque, NM. As the Board generally puts forward recommendations for rule changes at gatherings like those, the credit-granting public is awaiting more details.

The CFPB noted that the financial industry has been vocal in pushing for arbitration claiming that arbitration allows them to lower the prices that consumers pay for financial services. In order to test the premise, the Board found credit card issuers that were willing to remove the arbitration clauses from their credit card agreements for a three-year period, allowing the Board to study the differences experienced before and after those three years. The Board looked to see whether the cost of finance provided by those companies differed significantly from the prices charged by companies that retained their arbitration clauses. The CFPB was unable to identify any distinctions between the companies. Further, the CFPB was unable to note a difference in the amount of credit extended by companies without arbitration provisions compared to those with arbitration provisions.

Armed with this new data, the CFPB may be poised to dismantle the credit industry’s ability to rely on arbitration clauses to eliminate public, costly class action suits against credit companies.

For other information about consumer credit, fraud and arbitration, we invite you to review the links below to Legal Issues from Litigation Pathfinder.

• Is an arbitration agreement unenforceable if it is part of a contract of adhesion?
• May financial considerations prevent a waiver from being voluntary?
• Whether a defendants has proffered any admissible evidence that plaintiff assented to an agreement to arbitrate?
• Under California law, when may a court refuse to compel arbitration?
• Are arbitration agreements that make arbitration unduly costly for one party enforceable?

Further Reading and References:

Consumer Financial Protection Bureau, Arbitration Study: Report to Congress, p.2 (March 2015), available at: http://files.consumerfinance.gov/f/201503_cfpb_arbitration-study-report-to-congress-2015.pdf.