A total of 102 Democratic lawmakers, consisting of 37 Democratic Senators joined by Independent Senator Bernie Sanders and 65 House members, have signed on to letters sent to Director Cordray expressing support for the CFPB’s proposed arbitration rule. The proposal would prohibit covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action with respect to the covered consumer financial product or service. The proposal would also require a covered provider that is involved in an individual arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the CFPB.
Both letters tout the benefits of class actions for consumers and urge the CFPB to proceed “quickly” to finalize its proposal. However, they rely heavily on the CFPB’s March 2015 empirical study on consumer arbitration, which actually contradicts their position that class actions benefit consumers. The study showed that individual arbitration is faster, cheaper and far more beneficial to consumers than class action litigation. For example, according to the CFPB’s study, while the average payment to consumers from class action settlements was a mere $32.35, the average arbitration award to consumers was $5,389.00, and the dispute was resolved in a few months rather than several years.
Comments on the proposal must be submitted by August 22.