Arbitration and Agencies

Bloomberg's Carter Dougherty has a comprehensive story this morning reporting on steps by two agencies, the CFPB and the SEC, to study the use of mandatory arbitration clauses in consumer contracts, as mandated by the Dodd-Frank Act, with a view to possible regulation. This piece represents the most in-depth reporting on the issue so far. Read it here.

One thing missing from the story (presumably because it's outside Doughtery's beat) is a discussion of developments in the employment context--specifically, the NLRB's recent decision in D.R. Horton, which declares the use of class-action bans in arbitration clauses to be an unfair labor practice under federal law, the pending challenge to that ruling, and the NLRB's even more recent efforts to enforce the ruling in specific cases.

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[Stanley Iola, LLP]

We were certainly among the many who were alarmed by the AT&T Mobility v. Concepcion decision and would fully support any efforts from either the CFPB or SEC to reduce or eliminate mandatory arbitration clauses from consumer contracts. Elizabeth Warren’s comparison to “Darth Vader’s Death Star – the Empire always wins,” could not be more appropriate. As Mr. Dougherty’s article points out, class action lawsuits give consumers redress when “individual damage is small but the collective cost is large.” An attempt to address the arbitration clauses that effectively limit a consumer’s options would truly help the CFPB live up to its name.