The Consumer Financial Products Board has issued its report on the use of pre-dispute arbitration clauses in consumer finance contracts, as directed by Congress in the Dodd-Frank Act. In conducting its study, the CFPB looked at hundreds of financial agreements, reviewed thousand of disputes–including individual arbitrations, individual lawsuits, class actions, and public enforcement actions–and conducted a national telephone survey of 1,000 credit card users. The result is an exhaustive report (700 pages!) providing a wealth of detail about how consumer financial disputes are resolved and consumer understanding of their rights. Having concluded its study, the CFPB will now consider whether it should regulate or ban arbitration agreements in consumer finance contracts.
The report includes many findings, but its main thrust involves class action waivers. The Bureau found that very few individuals pursued formal redress for grievances with financial services companies, whether in court or in arbitration. In contrast, over the five year period studies, at least 160 million consumers were eligible for redress through class action settlements, and at least $1.1 billion was paid to consumers in cash payments (settlements totaled $2.7 billion in cash, in-kind relief, attorney’s fees, and court costs). Comparing financial services companies using arbitration clauses with class waivers to those without arbitration clauses, the Bureau found no evidence that arbitration agreements led to lower prices for consumers.
For a summary of the report’s findings, see the fact sheet issued with the full report.