CFPB Foreshadows Regs In Preliminary Arbitration Clause Report

The Consumer Finance Protection Bureau has issued a preliminary report on the use of arbitration clauses in consumer contracts. Among its findings: Arbitration clauses are widely used by large banks in credit card and checking account agreements; almost 90 percent of those clauses allow the banks to prevent consumers from participating in class actions; and credit card issuers are more likely to sue consumers in small claims court than the other way around. The authors of this article, several attorneys from Troutman Sanders, conclude that – given CFPB Director Richard Cordray’s explicit statement that the agency has authority to adopt rules regarding arbitration clauses if it finds that consumers are being harmed, and given that this authority has already been exercised to ban arbitration provisions in mortgage loans – “upcoming regulatory limitations on arbitration appear to be likely.”