ABA today sent a memo to members of Congress opposing an amendment to the financial services agencies spending bill. The amendment, proposed by Reps. Keith Ellison (D-Minn.) and Hank Johnson (D-Ga.), would strike a provision in the bill requiring the Consumer Financial Protection Bureau to study the costs and benefits to consumers of eliminating arbitrations in consumer financial contracts in favor of class action lawsuits.
The CFPB recently proposed a rule to drastically limit the use of mandatory arbitration agreements for financial products and services, but ABA pointed out that the research the bureau conducted in support of the rule was “incomplete and even contradictory.” The association urged members of Congress to vote down the amendment to ensure that the CFPB properly assesses the effects of its proposed rule on consumers before moving forward. ABA added that in general, consumers tend to fare better in arbitration than in class action suits.
“According the CFPB’s own class action sample, lawyers made about $1 million each, while the average consumer walked away with about $32. But that average consumer recovery assumes that there is any consumer recovery. In fact, only 15 percent of the putative class actions the CFPB studied reached a class settlement, and only 4 percent of those class members received a check,” the memo said. “Based on the CFPB’s research to date, it is impossible to justify denying consumers access to efficient, user-friendly arbitration in favor of diverting them into class actions where they have no control and little chance of success.”
