by Jeff Sovern
The CFPB Monitor blog has a post titled Industry trade groups urge OMB not to approve CFPB arbitration telephone survey about a filing by the American Bankers Association, the Consumer Bankers Association and the Financial Services Roundtable. They "strongly recommend that OMB not approve the proposal because it will not produce information of practical utility . . . ." I couldn't disagree more.
The survey will ask respondents what credit card they have. From that, the CFPB should be able to determine if the credit card contract includes an arbitration clause, waives the right to a jury trial, and the right to participate in class actions, among other things, because the Bureau has credit card contracts on file. The survey asks respondents about all those rights. Accordingly, the Bureau should be able to find out how aware consumers are about their surrender of those rights.
Suppose for the sake of argument that the Bureau finds that significant numbers of consumers don't realize that they have given up those rights. Wouldn't that raise questions about whether arbitration clauses are abusive within the meaning of 12 U.S.C. section 5531(d), which provides that conduct can be abusive a long as it “takes unreasonable advantage of— (A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service . . . "? The abusive definition establishes public policy that the Bureau should consider in exercising its discretion to ban or regulate arbitration in consumer financial contracts under the Dodd-Frank Act.
I will have a lot more to say about consumer understanding of arbitration clauses later in the summer.