A group of more than 80 House and Senate Republicans have sent a letter to Director Cordray asking the CFPB to reopen its arbitration study. The CFPB released the final results of its empirical study of consumer arbitration as mandated by Section 1028 of the Dodd-Frank Act in March 2015.
In their letter, the lawmakers comment that the process that led to the study was not “fair, transparent or comprehensive” and that, “[a]s a result, the flawed process produced a fatally-flawed study.” Echoing concerns we have expressed about the study’s deficiencies, the lawmakers observe that “[r]ather than focusing on the critical question — whether regulating or prohibiting arbitration will benefit consumers — and devising a plan to address the issues relevant to resolving that question, the bureau failed to provide even the most basic of comparisons needed to evaluate the use of arbitration agreements.” By way of examples, the lawmakers note that the CFPB failed to estimate “the transaction costs associated with pursuing a claim in federal court as compared to arbitration” or “the ability of a consumer to successfully pursue a claim in federal court without a lawyer, despite the fact that consumers often are self-represented successfully in arbitration proceedings.”
The lawmakers call upon the CFPB to “reopen the study process, seek public comment, and provide the necessary cost-benefit analysis for understanding how a similarly situated consumer would fare in arbitration versus a lawsuit.” Last month, five leading financial services industry trade groups also called on the CFPB to solicit public comments on the final results of its arbitration study before deciding whether to initiate a rulemaking proceeding. And, as we reported earlier today, the House Appropriations Committee has approved an amendment to the FY 2016 Financial Services Appropriations bill that would impose new requirements on the CFPB before it can issue a rule governing arbitration agreements.