In May, the CFPB released its proposed rule that would prohibit mandatory arbitration clauses that the bureau said denies groups of consumers “their day in court.” On August 22, the comment period for the proposal came to an end but that hasn't stopped organizations against the proposal from speaking out.
The American Bankers Association, the Consumer Bankers Association and the Financial Services Roundtable created a 42-page rebuttal for the proposal stating, "The proposed rule does not benefit society or consumers."
The rebuttal continues on saying, "Both lose because, as taxpayers, consumers will have to pay for additional resources needed by courts to accommodate the permanent influx of 6,042 additional class actions every five years. They lose because the cost of defending and settling cases — estimated to be between $2.62 billion and $5.23 billion every five years (100 additional lawsuits each month) — will be passed along to consumers in whole or in part in the form of higher prices or reduced services. Finally, they lose because, in exchange for waiting years to recover an average of $32.35, they lose all of the benefits of arbitration — benefits that the bureau itself touts to its own employees and expressly acknowledges in the proposed rule."
The trio also stated that the CFPB failed to consider alternatives that would address the need for a ban of class action waivers. The groups proposed multiple arguments for why arbitration is much more efficient for both consumers and financial services providers citing it was not needed to protect consumers and was not consistent with the arbitration study results done by the CFPB for Congress.
These groups are not the only ones vocalizing their dissatisfaction for the proposal. FreedomWork Foundation also reported that they generated 15,000 responses in objection to the rule. They stated in a recent release that they believe more class action lawsuits will lead to increased costs for all consumers as the sellers of financial products pass on those costs, with only trial lawyers benefiting from this proposal.
The CFPB shared in a release on the proposal that arbitration clauses leave consumers to seek relief on their own - usually over small amounts - but with the proposal, these rules would make the individual arbitration process more transparent by requiring companies that use arbitration clauses to submit any claims filed and awards issued in arbitration to the CFPB.
“Signing up for a credit card or opening a bank account can often mean signing away your right to take the company to court if things go wrong,” said CFPB Director Richard Cordray. “Many banks and financial companies avoid accountability by putting arbitration clauses in their contracts that block groups of their customers from suing them. Our proposal seeks comment on whether to ban this contract gotcha that effectively denies groups of consumers the right to seek justice and relief for wrongdoing.”