Congress Votes To Keep Choices by Repealing the CFPB’s Harmful Anti-Arbitration Rule

By Scott Talbott, Senior Vice President of Government Affairs, ETA 

ETA members — a diverse coalition of over 500 financial institutions, bankcard service providers, merchant acquirers and technology companies — are dedicated to offering products and services that are affordable, competitive and beneficial to consumers. In fact, their businesses depend on it.

That simple truth is precisely why we opposed the Consumer Financial Protection Bureau’s (CFPB) rule that all but eliminated arbitration as a choice for a legal pathway towards resolving a dispute, causing significant and substantial harm to American consumers and the U.S. economy.

The CFPB’s rule would have required consumers to participate in class-action lawsuits, which are often time-consuming, result in high legal fees paid out to trial lawyers, and minuscule settlements for consumers.

Arbitration is preferable to these types of lawsuits for many reasons. As illustrated in the CFPB’s own study, and supported by a report by the U.S. Treasury, customer arbitration is up to twelve times faster than ligation. Unlike trials, which must be scheduled into busy court calendars, arbitration hearings can be scheduled more easily and during non-business hours. Moreover, arbitration does not require consumers to hire an attorney and doesn’t require many of the burdensome practices of a lawsuit. Customers can participate in hearings in-person or remotely and in most cases, the financial services companies cover virtually all of customers’ costs to bring complaints in arbitration. Arbitration is also a last resort for many companies; most disputes are favorably resolved without legal action through good customer service. Even still, arbitration is an inexpensive, impartial, fast and flexible option for both consumers and financial institutions.

Further, class-action lawsuits result in millions of dollars in legal fees but provide little or no benefit to consumers. According to the CFPB’s own numbers, an average class action lawsuit member received just $6.29, while the lawyers leading the case received millions. Typically, arbitration results in much higher returns for consumers. The CFPB’s own study found that consumers won 47 cents on the dollar in arbitration cases where they received a recovery, versus minimal payments received by class action participants. And although class actions deliver smaller settlements to consumers, they are very expensive. In fact, the CFPB itself estimates find the rule will have generated over 6,000 class action lawsuits, costing businesses between $2 and $5 billion every 5 years.  Banning mandatory arbitration clauses shifts these costs onto the consumers and deprives them of these benefits.

Which is why your Government Relations team at ETA sprang into action on of behalf of ETA members. Our Senior Manager of Government Affairs Rebecca Cantrell and ETA’s Arbitration Working Group led the push against the rule. ETA met with members of Congress, filed a comment letter opposing the CFPB’s proposal, engaged our members and policymakers across multiple social media channels, held regular calls with ETA members, and spoke with the media and think tanks to articulate the benefits of arbitration and express the concerns with the CFPB’s regulation.

The effort was a success. On October 24, the Senate used a legislative tool called the Congressional Review Act to repeal the regulation, allowing for consumer choice in the dispute resolution process. The House passed the same resolution earlier in the year. We applaud their vote, and we encourage the White House to sign it into law.

Thank you to everyone for their work roll back the CFPB’s regulation on arbitration.