In its study of consumer arbitration dated March 10th, the CFPB concluded that relatively few consumer arbitrations have been filed. In a recent Consumer Law & Policy blog, Professor Jeff Sovern states that he is “skeptical” of my position that the CFPB’s conclusion can be explained, in part, by the fact that most consumers use informal methods for resolving their disputes with companies. He has invited me to produce “evidence” to substantiate my position. The following is the evidence requested by Professor Sovern, courtesy of the CFPB itself, along with some additional observations on the subject.
- With respect to Professor Sovern’s argument that dissatisfied consumers “mostly … don’t do anything” to complain to companies or external agencies, the CFPB states on its website that “[i]n just over three and a half years, we’ve handled more than 558,800 consumer complaints.” See http://files.consumerfinance.gov/f/201503_cfpb_complaints-by-the-numbers.pdf. That data, which covers July 2011 through March 1, 2015, is concrete “evidence” that substantiates my argument that substantial numbers of consumers do take measures to resolve complaints short of litigation or arbitration. Indeed, the CFPB website continues by stating: “The Bureau’s Office of Consumer Response hears directly from consumers about the challenges they face in the marketplace. We forward their complaints to companies and work to get them a response – generally within 15 days.” This is current data. And it is data supplied by only one agency covering less than four years. State agencies, including state attorneys general, generally provide their own complaint portals, as do private entities such as the Better Business Bureau. In any event, the CFPB’s own up-to-the-minute data shows that there is no cause for Professor Sovern to be “skeptical” of my claim.
- Professor Sovern further states that even if my claim is true, “it’s hard to see how it helps to defend arbitration.” More specifically, he writes, “If consumers benefit so much from arbitration …, why do consumers with arbitration clauses in their contracts prefer the Better Business Bureau? Why don’t they just use arbitration?” Professor Sovern has missed the point. Arbitration is faster, cheaper and more efficient than litigation, particularly class action litigation, but there are many informal ways of resolving disputes that are faster, cheaper and more efficient for consumers than either arbitration or litigation. Is arbitration more beneficial to the average consumer than a lawsuit or a class action? Absolutely. But I have never advocated that all consumer disputes should be resolved through arbitration. Professor Sovern’s argument is a red herring.
- Other reasons why “consumers don’t file arbitration claims” (Professor Sovern’s words) are that (a) Professor Sovern and consumer advocates have railed against arbitration for almost two decades, thereby fostering a negative public perception of arbitration, and (b) the CFPB has failed to educate consumers about the many benefits that arbitration can offer as opposed to litigation.
- Also interesting is what Professor Sovern did not address in his blog. He has yet to respond to our detailed showing over the past two weeks that the CFPB’s study is deeply flawed because it did not take into account the actual experiences of consumers in arbitration and class action litigation. Moreover, as we have established in detail, the statistics that are in the study actually support our position that arbitration is faster, cheaper and more efficient than litigation and more beneficial to consumers than class action litigation. See our e-Alerts here and here.