Eighty-five Republican members from the U.S. House of Representative and Senate urged the Consumer Financial Protection Bureau (CFPB) to revisit its arbitration study, seek public comment and “provide the necessary cost-benefit analysis for understanding how similarly a situated consumer would fare in arbitration versus a lawsuit.”
Ever since the CFPB released its Dodd-Frank-mandated study on pre-dispute arbitration in March, concerns over the research method applied have been expressed by lawmakers and industry members alike.
Republicans called the CFPB’s research process flawed, resulting in a “fatally flawed study.”
“Rather than focusing on the critical question – whether regulating or prohibiting arbitration will benefit consumers – and devising a plan to address the issues relevant to resolving that question, the bureau failed to provide even the most basic of comparisons needed to evaluate the use of arbitration agreements,” lawmakers said.
The letter went on to provide an example, adding that the CFPB had failed to estimate the transaction costs associated with a consumer pursuing a claim in federal court as compared with arbitration, and failed to estimate the ability of a consumer to successfully pursue a claim in federal court without a lawyer, “despite the fact that consumers often are self-represented successfully in arbitration proceedings.”
“The absence of comparison to even these basic data points throws suspicion on where other useful information has been sidestepped, if not willfully ignored,” lawmakers said.
The June 17 letter echoed concerns expressed by the American Bankers Association, American Financial Services Association, Consumer Data Industry Association, the Financial Services Roundtable and the U.S. Chamber of Commerce, which sent a joint letter of their own, asking the CFPB to provide interested parties with a 60-day period to comment on the study prior to issuing a rulemaking.
The groups requested the comment period because of the length of the study (729 pages) and to ease concerns over the bureau’s “limited outreach” regarding the study and the “lack of transparency and refusal to solicit public participation” in the study process.
“[S]oliciting comment now would allow the bureau to inform itself of the significant defects in the study’s analysis – defects that otherwise will fatally taint any proposed rule that the bureau might propose based on the study,” the groups said.
In its latest rulemaking agenda, issued in May, the CFPB stated that it was “considering whether rules governing arbitration clauses may be warranted.”
Related Articles
CFPB releases long-awaited arbitration study
CFPB frees up summer slate in latest rulemaking agenda