CBA Files Comments on CFPB’s Arbitration Proposal
August 29, 2016
While the CFPB did not go as far as ban arbitration agreements in consumer financial contracts (as it did in mortgage agreements), it is proposing to ban class arbitration waivers. The bureau had issued a detailed study of arbitration supporting the ban, but its findings have been criticized as one-sided and flawed. The study also fails to acknowledge the legitimate concerns about class arbitration (and class litigation), such as the low payouts to class members, settlements that reflect defendants’ need to avoid massive litigation costs regardless of wrongdoing, and the big payouts to plaintiffs’ attorneys. The unintended consequence of the class arbitration waiver ban is that companies may be unwilling to offer and subsidize individual arbitration altogether (to the detriment of consumers and companies) if offering arbitration comes at the price of exposing the company to class actions. See CBA’s comment letter for more information.