The CFPB has asked Alan Kaplinsky to present the industry perspective at a field hearing on arbitration in Newark, New Jersey, tomorrow. As the Bureau typically uses field hearings as the venue for announcing new developments, we expect that this hearing is likely to coincide with the release and submission to Congress of the Bureau’s arbitration study, which it conducted under Section 1028 of the Dodd-Frank Act.
Director Cordray will speak at the hearing, which also will feature testimony from consumer and industry representatives. It will be held at 11 a.m. at Essex Community College’s J. Harry Smith Lecture Hall, 303 University Avenue, Newark, and will be live-streamed.
Alan pioneered the use of consumer arbitration clauses in bank and credit card agreements in the mid-1990s. At that time, our clients were being sued in “judicial hellholes” where a company couldn’t even expect a fair shake. In some cases, they’d find out about a class action the same day they received a court order certifying the class.
Now, thankfully, arbitration agreements are much more common. Alan, my partners and I have fought vigorously to have them enforced and we have played a central role in the great debate over their use. Some people, the plaintiffs’ bar in particular, say that arbitration takes away a consumer’s right to sue. Not so. We often urge clients to give consumers an unconditional right to opt out of the arbitration clause without affecting the terms of the contract.
We believe that arbitration is a fair and time-tested way of settling disputes. It is also faster, cheaper, and more efficient than court litigation. In fact, consumers fare far better in arbitration than they do as members of class actions. Alan has more than 40 years of experience representing financial institutions of every size and scope and we have participated in scores of arbitrations. He is the perfect choice for this panel.
The CFPB began seeking information about arbitration in April 2012, when it published a request for information about the scope, methodology, and data sources for its study. Alan represented the American Bankers Association, Consumer Bankers Association, and Financial Services Roundtable in responding to that request.
In December 2013, the agency published preliminary results. Section 1028 of Dodd-Frank requires the CFPB to conduct the study and allows it to regulate, limit, or even prohibit the use of arbitration in the offering of consumer financial products or services if doing so is found to be “in the public interest and for the protection of consumers.”
We believe that, once consumers are fairly presented with the facts, they will typically choose arbitration over litigation. The Bureau could play a constructive role by presenting to Congress a balanced presentation of the benefits and drawbacks. It is our sincerest hope that they have done that.