AmBanker: CFPB’s Arbitration Plan Is Likely Dead on Arrival

Here (behind paywall).  The article lists various possible industry strategies for blocking the rule: fire CFPB Director Cordray before he can adopt the new rule or after it is adopted and appoint a new director who will rescind it; Congress could preempt the rule from taking effect through the Congressional Review Act or the Financial Choice Act; challenge a rule through litigation.  In one interesting passage, an opponent of a CFPB arbitration rule, Virginia law professor Jason Johnston, seemingly acknowledges that arbitration prevents consumers from asserting small claims:

Currently, a wide range of consumer finance firms have been shielded from billions in potential liability, especially over small-dollar disputes that might lead to class actions but are bound by mandatory arbitration. Filing an arbitration claim costs about $200, so any dispute for less than $200 likely does not get filed.

The average $200 fee "is a barrier to filing an arbitration claim," Johnston said.

He suggests that institutions take care of many small-dollar disputes because companies refund billions in consumer fees and charges every year. But there is no data repository to determine how many refunds stem from disputed charges. 


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