Dear Rohit:
Congratulations on your confirmation to serve as Director of the Consumer Financial Protection Bureau! You are an excellent choice for many reasons, not least because you bring to the CFPB helm the experience of having served as an FTC Commissioner as well as having been at the CFPB in its earliest days.
Much has been written about the matters you are likely to pursue. No doubt much is also being written and said to you about what people want you to do. This is one of those communications: I hope you will use the CFPB’s power to regulate arbitration clauses. Pre-dispute arbitration clauses remain a serious limit on consumer protection and they are made all the worse by the fact that people agree to them without even knowing that they are surrendering constitutional rights.
It may feel as if you don’t have a deadline to act on arbitration clauses and so can put it off to attend to other matters that may seem more immediate. In fact, I fear you may have such a deadline. Because we do not know how the 2024 presidential election will go, your service at the Bureau might, unfortunately, end on January 20, 2025. And because of the Congressional Review Act, it is possible that Congress could block in 2025 rules adopted during the second half of 2024. In other words, your deadline for rules, including an arbitration rule, might actually be some time during the first half of 2024—less than three years from now. Accordingly, I hope you will not delay moving on arbitration clauses.
Some argue that Congress’s use of the Congressional Review Act in 2017 would prevent you from acting. For reasons I have explained at https://pubcit.typepad.com/clpblog/2021/05/a-suggestion-to-the-cfpb-for-a-new-arbitration-rule.html, I do not think that is so. If you proceed, there will be a battle, but it is a battle worth fighting.
One final point: many disagreements between consumer advocates stem from the desire of consumer advocates to prevent consumers from making poor choices (e.g., predatory loans, payday loan debt traps, and yes, contracts with arbitration clauses) and the desire of the industry to maximize consumer ability to make choices, including very bad ones. The unnecessary deaths of unvaccinated people from Covid has brought home the consequences of allowing people to make terrible decisions in another context. Similarly, during the Great Recession, millions lost their homes because they had willingly entered into tragic transactions. You can’t save lives, but part of your job is to prevent people from entering into transactions that could blow up their lives. I look forward to watching you do so.
Jeff Sovern
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