CFPB’s Arbitration Study Report to Congress

consumer financeIn March, 2015, the Consumer Financial Protection Bureau (CFPB) issued its 728 page report to Congress pursuant to Section 1028(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. You can view the CFBP fact sheet here.

The CFBP was instructed by Congress to study the “use of agreements providing for arbitration of any future dispute … in connection with the offering or providing of consumer financial products or services.”

Apart from the Introduction and Executive Summary, and its Appendix A, the CFPB report contains 10 sections and each one is framed as a question concerning arbitration clauses in consumer finance contracts, which each section then attempts to answer.

Among the CFPB report’s key findings related to class actions are as follows:

  • Three quarters of credit card consumers surveyed did not know if any of their contracts contained an arbitration clause, and only 7% understood they could not sue their company if a contract included an arbitration clause;
  • Consumers do not often use arbitration to assert claims against companies, roughly 600 per year on average in the markets studied;
  • Consumers do not often bring individual lawsuits against companies, particularly small claims, roughly 1,200 federal lawsuits per year on average in the markets studied;
  • CFPB research indicates tens of millions of consumers are covered by arbitration clauses in the consumer finance markets studied;
  • It is common for companies to assert arbitration clauses to compel arbitration to avoid class actions, and less common in individual lawsuits;
  • There is no evidence that consumer prices are lower when companies are not subject to class action lawsuits due to the presence of pre-dispute arbitration clauses;
  • CFBP research found that over the past 5 years, consumer finance class actions resulted in 160 million class members being eligible for relief, and settlements totaled $2.7 billion in cash, in-kind relief, and attorneys fees and expenses – with roughly 18% of that going to expenses and attorneys fees;

View the CFBP fact sheet here.

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