CFPB Issues Report on Arbitration Clauses Governing Financial Products and Services

By on March 11, 2015

The Consumer Financial Protection Bureau (CFPB) issued a report to Congress on the advantages and disadvantages of pre-dispute arbitration provisions in connection with consumer financial products or services including bank accounts and credit cards.

The study was conducted according to Section 1028(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which instructs the CFPB to study “the use of agreements providing for arbitration of any future dispute . . . in connection with the offering or providing of consumer financial products or services,” and to provide a report to Congress on the same topic.

The premise of the report focuses on a battle on interests between consumer advocates who characterize pre-dispute arbitration as harmful to consumer rights and remedies and industry representatives who point to purported cost savings passed along to consumers resulting from arbitration in lieu of litigation.

The CFPB concluded that they “did not find statistically significant empirical support for the theory that companies pass savings from their use of arbitration clauses onto consumers.”

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