The CFPB’s Flawed Arbitration “Study”

Tuesday, March 8, 2016 - 11:45am
Arbitration is an important means of resolving disputes that provides significant benefits to consumers and businesses. As the U.S. Chamber of Commerce Center for Capital Markets Competitiveness (“CCMC”) and the U.S. Chamber Institute for Legal Reform (“ILR”) explained in detail in comments to the CFPB,1 arbitration of consumer disputes has been common practice for decades; there are perhaps hundreds of millions of consumer contracts currently in force that include arbitration agreements—many of them relating to consumer financial products or services.
 
The Bureau’s study is deeply flawed in numerous respects:
  • It ignores the practical benefits of arbitration as compared to the court system for vindicating the types of injuries that consumers most often suffer (pp. 1-3, below);
  • It greatly exaggerates the supposed benefits of class actions (pp. 3-8);
  • It ignores the significant role of government enforcement—particularly the CFPB’s own enforcement and supervision processes—in protecting consumers (pp. 8-9).
  • It fails to consider the benefits that arbitration provides to injured parties in a variety of contexts—including in consumer arbitrations, when consumers are not discouraged by plaintiffs’ lawyers and others from invoking arbitration (pp. 9-14); and
  • It wrongly denies the reduced transaction costs resulting from arbitration, which produce lower prices for consumers (pp. 14-18).

To read more, download the full document.