Senator Cotton’s Ignorance About Ignorance and the CFPB’s Arbitration Rule

by Jeff Sovern

Yesterday, according to The Hill, Senator Tom Cotton of Arkansas, announced that he would seek to block the CFPB's Arbitration Rule using the Congressional Review Act, saying:

“The Bureau’s new rule on arbitration clauses ignores the consumer benefits of arbitration and treats Arkansans like helpless children, incapable of making business decisions in their own best interests . . . ”

Well, ok.  Except that every study that has looked at the issue (including one I co-authored) has found that consumers don't understand arbitration clauses.  See here and here. Not only has no study ever found that consumers understand them, but industry lobbyists concede consumers are not aware of arbitration clauses.  See American Financial Services Association, Comment Letter on Telephone Survey Exploring Consumer Awareness of and Perceptions Regarding Dispute Resolution Provisions in Credit Card Agreements (Aug. 6, 2013) (“The results of the [proposed CFPB] Survey will undoubtedly show that the vast majority of consumers are not aware of most of the provisions in their card agreements . . . . [S]tudies have shown that consumers do not generally read contracts. Accordingly, if consumers do not read contracts generally, there is no reason to assume that they may read an arbitration provision, in particular . . . . [T]he [proposed CFPB telephone] Survey is likely to show that consumers are not generally aware of the arbitration provision in their credit card agreement . . . .”). Cf. U.S. Chamber of Commerce, Statement on Examining the CFPB’s Proposed Rulemaking on Arbitration: Is it in the Public Interest and for the Protection of Consumers, App. 15 (May 18, 2016) (hereinafter, Chamber of Commerce Statement) (“The only data that the Bureau’s study delivers is that, unsurprisingly, consumers are not focused on arbitration clauses.”); U.S. Chamber of Commerce, Comments on Proposed Rulemaking on Arbitration Agreements 31 (Aug. 22, 2016) (same).

If we were to take Senator Cotton's logic to its extreme, we wouldn't require prescriptions for medications, because after all, requiring prescriptions assumes patients are incapable of making medical decisions in their own best interests.  We wouldn't require cars to be safe, because such requirements assume consumers can't make decisions about whether they want a safe car or not.  We would allow anyone to practice law or medicine without a license because . .  .  well, you get the idea.



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