I have been contacted by many clients who have asked me whether we should read any significance into the fact that the anti-arbitration Petition for Rulemaking submitted to the CFPB by a consortium of consumer advocacy groups on September 13 is not mentioned in the new rulemaking agenda. Mark Levin, Professor David Sherwyn of Cornell University, and I submitted a comment letter to the CFPB on November 14 (the deadline for submitting comments to the CFPB) in which we strongly opposed the Petition for Rulemaking. (Our comment letter contained an audio link to the episode of our Consumer Finance Monitor Podcast we released on the same day along with a transcript of the episode.)
Unfortunately, I do not draw any significance from the omission of the Petition for Rulemaking from the agenda. That is because the agenda states that it is accurate as of August 17 and the Petition for Rulemaking was filed with the CFPB about one month later on September 13.
If the Petition is omitted from the next agenda released in June 2024, we might be able read something into that. I have little doubt that Director Chopra likes the idea of developing a de facto ban on all consumer finance arbitration provisions and that it won’t take long to read the 31 comment letters (only a handful of which were substantive). Embarking on a new rulemaking at this time, however, would be very difficult because the CFPB staff involved in rulemaking has a full plate of other rules that are already in the pipeline.
Moreover, because the 2015 empirical study conducted by the CFPB as a prelude to the anti-arbitration rule the CFPB issued in 2017 did not support banning the use of pre-dispute arbitration provisions, the CFPB would need to launch a brand new study. Such a new study, like its predecessor study, would likely take several years to complete. Also, there is no reason to believe that the results of a new study would support a ban on pre-dispute arbitration provisions which, as we pointed out in our comment letter, would be tantamount to an outright ban. Finally, the CFPB would undoubtedly realize that any new any-arbitration rule would likely be challenged in court based on it being proscribed by the Congressional Review Act and other grounds.
Politically, there is no good reason for Director Chopra to jump into this hornet’s nest. The CFPB already fulfilled its responsibility under the Dodd-Frank Act to conduct a study, and to then decide whether to propose a regulation of some sort. It is not obligated to conduct a new study or to launch a new rulemaking, particularly since Congress has bills pending before it which deal with consumer arbitration.