A recent editorial in the Wall Street Journal is a “must read” for those who will be affected if the CFPB’s May 5, 2016 proposed rule banning class action waivers in consumer financial services arbitration agreements becomes final. The editorial predicts that the proposed rule will encourage more class actions to be filed against financial services companies, that consumers will be shortchanged by the loss of arbitration, and that the only winners will be the trial lawyers who reap enormous financial benefits from class action settlements. We could not agree more.
Our only quibble is that the editorial states that other researchers “crunched the numbers” in the CFPB’s March 2015 arbitration study to arrive at the conclusion that “the average class member receives a whopping $32 from a settlement.” For the record, we believe that we first crunched those numbers during our March 18, 2015 webinar analyzing the CFPB’s study, and they were featured prominently in the July 13, 2015 comment letter sent by the American Bankers Association, the Consumer Bankers Association and The Financial Services Roundtable to the CFPB on July 13, 2015 for which we served as counsel.
As we have previously noted, the CFPB itself did not do the “long division” in the Study to arrive at the $32.35 number. However, the CFPB’s commentary on the proposed rule now confirms that our math was correct and that on average, putative class members in the settled class actions it studied received “approximately $32 per class member.” (Proposed Rule, p. 73 n. 305).
If you haven’t done so already, please register for our webinar this coming Monday, May 23, where we will address “The CFPB’s Proposed Arbitration Rule: What You Need to Know.” We will discuss, among other things, who and what is covered by the proposed rule, whether existing arbitration agreements will be grandfathered, whether arbitration agreements should continue to be used for individual arbitrations and what you can do to protect your company from the anticipated onslaught of class action litigation. We might even crunch some more numbers.