In a September 20 report, the Office of the Comptroller of the Currency (OCC) seriously undermined the integrity and completeness of the CFPB’s empirical study of consumer arbitration that purports to be the foundation for its final arbitration rule. In its study, the CFPB concluded that it did not find any statistically significant evidence of increases in the cost of consumer credit associated with banning arbitration clauses in credit card contracts. However, the OCC, reviewing the same data, found “a strong probability of a significant increase in the cost of credit cards as a result of eliminating mandatory arbitration clauses.” In particular, it found an 88% chance that the total cost of credit will increase and a 56% chance that costs will increase by 3% or more. The average increase in the total cost of credit is expected to be 3.43%. In addition, the OCC stated that additional research would be required “to explore the potential effect on consumer payments, their ability to pay the higher cost and the potential for an increase in delinquencies, or changes in the availability of certain financial products intended to meet the financial needs of consumers.”
The OCC Report is another compelling reason why the Senate should vote to repeal the arbitration rule under the Congressional Review Act. It shows that the conclusions drawn by the CFPB from its study data cannot be trusted, and its research was incomplete. The fact that the CFPB underestimated the economic impact of the arbitration rule on consumers raises questions whether it also underestimated the financial impact of the rule on financial services companies. The CFPB estimated that the arbitration rule will result in 6,042 additional federal and state court class actions over the next five years that will cost companies between $2.6 billion and $5.3 billion to defend. As if these figures were not staggering enough, there is now real concern that they are too low!