Michelle Singletary (and Richard Cordray) on Mandatory Consumer Arbitration

In yesterday's Washington Post, Michelle Singletary uses the Supreme Court's recent decision in Compucredit v. Greenwood (which we mentioned and linked to here) as a springboard to discuss the debate over pre-dispute mandatory arbitration clauses in consumer contracts. She reminds us that the Dodd-Frank financial reform legislation requires the new Consumer Financial Protection Bureau to study arbitration. Based on that study, the CFPB can, by regulation, ban or limit arbitration in matters within the CFPB's authority. Singletary quotes Richard Cordray, the new recess-appointed head of the CFPB, who says that “[w]e understand the importance of this issue, and we’ll be moving forward as required by Congress.”

Comments

[telemarketing list]

The last survey found that the most frequent types of fraud included fraudulent weight-loss programs, fraudulent foreign lotteries and buyers clubs.

[mailing list companies]

It will be interesting to see how the economic recession and home foreclosures during the past two years affects the next survey's results.

[hasid ngone]

Who can e-mail/ or contact Richard Cordray, CFPB when you need him?

[John B.]

CFPB needs and must do the study. I expect they will identify risks and benefits to consumers for the use of arbitration (because they have to be balanced). I expect they will recommend that arbitration in some financial agreements not be permitted (such as when the consumer enters in to a transaction and then has 30 days after the transaction to 'opt out' of arbitration). Why - because the consumer should know going in not after the transaction and be able (at the time of the transaction) to make their choice. I believe they will recommend that Congress consider creating a consumer exception under the Federal Arbitration Act. What the CFPB should not do - even though it is highly desirable - is to ban arbitration in consumer financial transactions. They have braod authority - but it is hard to see how that action will survive a challenge. Bascially the CFPB having the authority to overturn a US Supreme Court decision and to disregard law and Congressional intent. That could actually result in dismantling of the CFPB.