AFSA Opposes CFPB Proposed Rule on Arbitration
WASHINGTON, D.C. – May 5, 2016 – The Consumer Financial Protection Bureau (CFPB) proposed rule governing arbitration was released this morning in conjunction with a field hearing in Albuquerque, New Mexico. As the American Financial Services Association (AFSA) anticipated, the proposed rule bans the use of class-action waivers in consumer credit agreements.
Late last year, the CFPB released a study on arbitration which the bureau says shows that consumers are harmed by arbitration agreements as opposed to class action lawsuits. However, a careful review of the CFPB’s study demonstrates that the opposite is true – consumers are actually better served by arbitration agreements. In 60 percent of class actions studied by the CFPB, consumers received no remuneration at all.
In the 15 percent of cases where consumers received monetary compensation in class actions, they received an average of just $32.35, after waiting an average of 24 months. In contrast, consumers who prevailed in arbitration agreements, on average, received $5,389. The real winners in class action lawsuits are plaintiff’s attorneys who divided approximately $424 million in fees.
Despite a wealth of evidence suggesting that the bureau’s interpretation of its own study is flawed, today’s rule, in its present form, would have a negative impact on customers by taking away a valuable tool to resolve disputes.
AFSA will comment on the proposed rule and will continue its ongoing dialogue with the CFPB.
May 5th, 2016 by AFSA