With Rule-Making Expected, CFPB's March 2015 Arbitration Study Continues To Draw Attention

In a recent letter, 58 members of Congress asked the Consumer Financial Protection Bureau (CFPB) to exercise its rule-making authority and ban mandatory arbitration provisions in consumer financial agreements. In support of their request, the authors cite the CFPB's March 2015 internal study on arbitration, which the CFPB conducted pursuant to Section 1028 of the Dodd-Frank Act. The CFPB claimed that arbitration limits consumer relief, from a strict dollar perspective, in disputes with financial institutions. Critics, meanwhile, have charged the CFPB with a lack of impartiality and a predisposed bias against arbitration provisions.

Under Section 1028, the CFPB may promulgate rules to restrict or wholly prohibit the use of mandatory arbitration provisions in consumer financial agreements. There are just two limitations on the CFPB's authority here. First, the CFPB may not restrict a voluntary arbitration agreement entered after a dispute has arisen. Second, any rule