United States: CFPB’s Field Hearing On March 10, 2015 On Arbitration Expected To Coincide With Release Of Its Report To Congress On The Use Of Pre-Dispute Arbitration Clauses

On March 10, the CFPB will hold a field hearing on arbitration at 11 a.m. in Newark, New Jersey.

The event will include remarks by Richard Cordray, head of the Consumer Financial Protection Bureau, and will be held at the J. Harry Smith Lecture Hall at Essex Community College, 303 University Avenue.  Tomorrow's field hearing is open to the public and requires an RSVP, which can be done via email to: cfpb.events@cfpb.gov

Cordray's prior remarks at a field hearing on arbitration on December 12, 2013 coincided with the release of the CFPB's Arbitration Study Preliminary Results: Section 1028(a) Study Results to Date (Preliminary Results).  Cordray also sought industry participants' input on the arbitration process and experiences with arbitration clauses.  He reaffirmed to the financial services industry that the CFPB views the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) as a statute "in which Congress diverged from the general policy of favoring arbitration as expressed in the Federal Arbitration Act" and indicated that the CFPB's forthcoming report on pre-dispute arbitration clauses will be used by Congress to make important policy decisions.  A recording of this prior arbitration field hearing from 2013 is available here.

As we previously discussed, in November 2014 a group of sixteen state attorneys general wrote a letter to Cordray encouraging the CFPB to take immediate action to crack down on pre-dispute mandatory arbitration clauses in consumer agreements for financial products or services.  The letter came on the heels of the reported completion of the CFPB's preliminary two-year study of the use of pre-dispute arbitration clauses in contracts for financial products and services, and clearance for the CFPB to conduct a nationwide telephone survey of credit card users regarding their knowledge of arbitration clauses.

Given the timing of the prior field hearing on arbitration and the CFPB's release of preliminary study results, many industry participants expect the CFPB will use the field hearing to release its Final Report to Congress.  According to Jonnelle Marte of The Washington Post, "The CFPB's report, ordered under the Dodd-Frank Wall Street Reform and Consumer Protection Act, is widely expected to lead to new rules limiting how companies can use mandatory arbitration clauses, consumer advocates say.  The timing of the release of the report [during the week of March 9] was confirmed by people familiar with the matter who spoke on condition of anonymity because the research has not yet been made public."

Dodd-Frank section 1414 bans outright pre-dispute arbitration agreements in residential mortgage contracts, and section 1028 directs the CFPB to study the use of them in other consumer financial products and services and to later report to Congress.  Pursuant to Section 1028(b), the CFPB may prohibit, condition or limit the use of arbitration provisions in consumer financial services agreements if it finds that doing so is "in the public interest and for the protection of consumers."

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