WASHINGTON- Financial Services Committee Chairman Jeb Hensarling (R-TX) today issued the following statement regarding an announcement by the CFPB that it plans to limit arbitration clauses in financial contracts:
“Every day, Americans are seeing their liberties slip away as Washington inexorably grows larger, more intrusive, more distant, and more arrogant. Nowhere is this more evident than at the CFPB, where its unelected and unaccountable director is vested with the awesome power of the entire United States Congress when it comes to consumer financial products. Today, this de facto dictator has decided to restrict Americans’ ability to resolve financial contract disputes through arbitration. This move – which will apply to some of the most common financial contracts including credit cards, checking accounts, and even cell phones – essentially hands over the keys of the CFPB’s luxury office building to the wealthy, powerful, and politically well-connected trial lawyer lobby. Today’s announcement is just another example of the CFPB abusing power that it never should have had in the first place. It is past time for Congress to strip the CFPB of its unfettered rule-making authority and return it to the elected representatives of ‘We the People,’” said Hensarling.
The CFPB’s announcement today is based on a 2015 Bureau study on arbitration agreements in connection with the offering or providing of consumer financial products or services. That report was met with widespread criticism from academics and industry alike for failing to make useful comparisons between the outcomes of the various permutations of individual and class litigation versus similar claims under arbitration, as well as awards versus settlements.
On June 17, 2015, more than 80 House and Senate members wrote Director Cordray requesting that the Bureau reopen its controversial arbitration study, citing issues with the methods by which the study was conducted, including that the processes that developed the study were not “fair, transparent, or comprehensive.”