Will consumer agency ban mandatory arbitration in consumer contracts? Study could be first step
Tens of millions of consumers use financial products or services that require arbitration of disputes, according to a new report by the Consumer Financial Protection Bureau.
Most of the contracts studied bar class-action arbitrations, and most include a carve-out that allows consumers to sue in small claims court, the report (PDF) said. The New York Times and the National Law Journal (sub. req.) have stories on the findings.
Consumers obtained relief on their affirmative claims in 32 out of 341 cases studied that were resolved by arbitration, and they obtained debt forbearance in 46 cases. The total amount of affirmative relief awarded was $172,433 and total debt forbearance was $189,107.
Companies, on the other hand, obtained relief in in 227 out of 244 claims or counterclaims filed against consumers. The total amount of relief was $2.8 million.
The report analyzed companies that dropped arbitration clauses as a result of an antitrust settlement. The CFPB found no statistically significant evidence that the companies charged more or provided less credit than other companies that retained mandatory arbitration.
The Dodd-Frank Act, which created the CFPB, directed the agency to study arbitration clauses in consumer financial agreements. The law also allows the CFPB to ban or limit arbitration clauses in consumer financial contracts, through regulations, if it is consistent with the study.
