by Jeff Sovern
Yesterday the U.S. Chamber of Commerce, along with some other organizations, released a letter setting forth "priority recommendations" for the Consumer Financial Protection Bureau. The Chamber calls forthe Bureau to defer rule-making until after a director is confirmed. It is hardly surprising that an organization that opposed creation of the Bureau at all would wish to prevent it from making rules for as long as possible. in my view, we have waited too long already for consumer protection.
But here's my favorite part of the letter:
We support the Bureau’s early efforts to improve disclosure and seek industry input and urge that disclosure simplification across products be among the first of the Bureau’s priorities. Of course, disclosure obligations cannot and should not be used as a means to prevent inclusion within a contract of the necessary and appropriate terms of a transaction, including alternative dispute resolution provisions that are permitted under applicable state and federal laws—provisions that courts have found to reduce cost and increase consumers’ ability to obtain fair resolution of disputes.
I have several comments. First, when did arbitration clauses become a necessary part of a transaction? Second, why would the Bureau try to block arbitration through disclosure rules when § 1028 expressly authorizes the Bureau to bar arbitration clauses after studying the issue? (I won't bother responding to the Chamber's comments about the value of arbitration clauses; plenty of others have already refuted such claims on this blog and elsewhere). Third, I wouldn't get too excited about the Chamber's support of disclosure rules, if that's what the letter evinces. As my co-blogger Chris Peterson has observed, the industry often prefers disclosure requirements to outright prohibitions on conduct. Because, as the empirical evidence indicates, consumers frequently ignore disclosures, disclosure laws permit firms to continue business mostely as usual, while bars on conduct limit what they can do. All too often, disclosure consumer protection turns out to be no consumer protection at all.
So the two parts of the letter mentioned above turn out to urge the Bureau to do nothing for as long as possible and then to create the illusion of consumer protection without the reality. That's not what Congress created the Bureau to do.
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