St. Mary's Law Journal
In October 2015, the Consumer Financial Protection Bureau (“CFPB”) announced that it would propose a rule banning class action waivers in arbitration agreements for consumer financial services products. This proclamation came to fruition in May 2016 when the CFPB proposed 12 C.F.R. part 1040 and sought public comment on the proposed rule. The CFPB claims that the class-waiver, often imbedded in consumer arbitration agreements, gives companies a “free pass from being held accountable by their customers[,]” comparing it to the relief a consumer can obtain as being part of a class action. At the same time, the CFPB proposed reporting requirements to the CFPB in the individual cases that proceed to arbitration. Tellingly, however, when the CFPB published its proposed rule, it chose to exclude federal and state government financial entities from the ban on class-waivers.
Perhaps the most important struggle faced by permitting mandatory predispute consumer arbitration to continue evolving is the argument that consumers simply will not bring claims. Some claims are either too difficult to discover, or too difficult to prove without a team of attorneys or protracted discovery. This is undoubtedly true for some claims, although it would be difficult to estimate how much. It is also undoubtedly true that many class claims are not worth the societal costs (evidenced by the 60% failure rate among those that do not result in class settlement). One solution is to rely on public enforcement. The CFPB has breathed new life into the tools of the federal agency avenger, negotiating numerous settlements or fines with consumer financial services companies. The Federal Trade Commission (“FTC”) could equally rise to the consumer protection task, as can state attorneys general. With consumer education and a willingness of a new wave of attorneys to engage in repeat consumer arbitration filing, consumer arbitration has the potential to prove a fruitful new arena for free and individual consumer recovery, run much like a private administrative law court. But the process is still early, and there are many regulatory measures appropriately called for that stop short of banning arbitration outright/
Ramona L. Lampley, The CFPB Anti-Arbitration Proposal: Let’s Just Give Arbitration a Chance, 48 St. Mary’s L. J. 313 (2016).