Consumer Financial Protection Bureau Releases Arbitration Study Results

The Consumer Financial Protection Bureau (CFPB) has been in the news a lot recently. From their ill-conceived actions related to Operation Choke Point to new proposals that the company has recently announced about payday lending, this government watchdog group has been staying very busy as of late. It should come as no surprise, then, that the CFPB has officially announced the results of its study on the Pre-Dispute Arbitration Clauses. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 dictated that the CFPB would have to conduct this study and provide a report on the findings to Congress.

The findings to be provided have to do with the use of agreements used to provide arbitration for future disputes between consumers with relation to the use of consumer financial services and/or products. The CFPB reached the conclusion that arbitration agreements actually hinder relief for consumers’ disputes with companies that provide financial services, by limiting the stakes in class action law suits. The study seems to indicate that millions of Americans get financial compensation via class action lawsuits every year, but that few consumers ever try to get financial relief via arbitration and the court system.

The study itself is pretty dense; coming in at 728 pages and is described by the CFPB as being more empirical in its methods than evaluative. The report includes 10 different sections and more than a few appendices. The CFPB states that the study is the most comprehensive of all empirical studies conducted on financial arbitration ever put together. Besides the report introduction and executive summary, the report covers these topics:

  • The main features of pre-dispute arbitration clauses.
  • How consumers understand dispute resolution systems that are regularly used.
  • The difference between arbitrations and traditional court proceedings.
  • All of the different types of claims that can be arbitrated and resolutions.
  • Different types of claims that can be litigated, and their results.
  • How consumers can know if they are able to sue in small claims court.
  • The benefits of class action lawsuit settlements.
  • The dynamics of relations between consumers and public enforcement.
  • Facts about whether or not arbitration clauses actually lead to lower prices for financial service consumers.

In addition to all of these topics, there are appendices that include quite a bit of information. There are appendices and references to tons of background information, study data and even more in depth descriptions of the actual study methodologies used to put the final report together.

While it is true that there are not many people out there, other than maybe President Obama, who are big fans of the CFPB, it is nice to know the bureau actually stuck to the requirements placed on it by Congress in producing this report. And while the actual reading of this in depth report may be a bit much for everyday reading, it is good information that people should be aware of. However, as we all know, data can be sliced, diced and served up in such a way to meet the presuppositions of the people preparing said report. However, that should not stop those who are against the most recent actions of the CFPB from being aware of this report and perhaps keeping it on hand for future reference. This is especially true for people who are involved in any of the businesses that the CFPB has targeted in the past, like payday lenders, title loan companies or any other provider of alternative financial services.

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