According to a report appearing in today’s Law360, CFPB Director Rohit Chopra has indicated that the agency appears unlikely, at least in the near future, to undertake new rulemaking that would regulate the use of consumer arbitration agreements. The CFPB’s previous rule—which would have forbidden companies from including class action waivers in consumer arbitration agreements—was overridden by Congress in 2017 under the Congressional Review Act. Director Chopra reportedly acknowledged that the Act prohibits the agency from implementing a substantially similar rule.
The report states that Director Chopra’s comments were made at a virtual event organized by Public Justice. Before that event, Public Justice and other consumer advocacy groups sent a letter to Director Chopra urging the CFPB to limit the use of “forced” arbitration agreements with class action waivers by banks and financial institutions because consumers need class and collective action procedures in order to vindicate their rights.
Importantly, however, the letter makes no reference to the many findings in the CFPB’s 735-page empirical study of consumer arbitration that preceded its issuance of the earlier rule that consumers actually fare better in arbitration than in class actions. For example, as we have previously observed, the CFPB study found that consumers who prevailed in an individual arbitration recovered an average of $5,389, and the entire arbitration process was concluded in an average of 2-7 months. By contrast, consumers who received cash payments in class action settlements got a paltry $32.35 on average after waiting for up to two years, while their lawyers recovered a staggering $424,495,451. Moreover, consumer arbitration agreements are not “forced,” as the letter contends, since most of them give consumers the right to reject the arbitration provision without affecting any other terms of the contract.
According to the Law360 report, Director Chopra indicated that the CFPB will continue to try to “‘figure out what the path forward is’” for consumer arbitration, adding that “‘[w]e are thinking about this issue quite a bit with respect to repeat offenders and more broadly, but no specific plans as of now.’” This reference to “repeat offenders” is puzzling, since nothing in the Consumer Financial Protection Act authorizes the CFPB to restrict or prohibit the use of arbitration for alleged violations of law, and any such activity would be plainly inconsistent with the Federal Arbitration Act.
In any event, as we observed in debating these issues with Professor Jeff Sovern, it is understandable why the CFPB is reluctant to add arbitration rulemaking to its already robust regulatory agenda. As Director Chopra acknowledged, under the Congressional Review Act the agency cannot rely on its earlier (overridden) arbitration rule. It would have to initiate a new arbitration study and spend many years and substantial resources on a complex and controversial rulemaking without having any assurance of success.