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Dodd-Frank: CFPB Releases Preliminary Findings on Arbitration in Consumer Contracts

Section 1028(a) of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act instructs the Consumer Financial Protection Bureau (CFPB) to study the use of pre-dispute arbitration provisions in consumer financial contracts, and to report on this to Congress. The CFPB announced at a field hearing in Dallas, Texas on December 12, 2013 the preliminary findings of this study, which will be used by Congress to determine whether arbitration clauses should be “prohibited, conditioned, or limited in any way” in contracts for consumer financial products and services according to “the public interest and for the protection of investors,” see CFPB press release and report of the study’s preliminary results.

In his prepared remarks, CFPB Director Richard Cordray explained that the CFPB study focused on pre-dispute or mandatory arbitration clauses, which he characterized as agreements in standard-form contracts, “where the terms are not subject to negotiation,” and are “essentially ‘take-it-or-leave-it propositions.’” Among the study’s most notable findings, Mr. Cordray pointed out that “large institutions are more likely to include an arbitration clause in consumer contracts than community banks or credit unions” and “arbitration clauses are very common across all prepaid card contracts – regardless of whether they are offered by larger or smaller players.” In addition, “arbitration clauses in credit card agreements were almost always more complex and written at a more demanding grade level of readability than the other parts of the contracts we studied.” In addition, Cordray noted, more than ninety percent of the arbitration clauses looked at explicitly barred consumers from participating in class arbitrations – a topic that has been widely litigated in recent years and the subject of several significant US Supreme Court decisions; see 31 Alternatives 17, 30-32 (Feb. 2013) [subscription required] (reviewing the topic of class arbitration as of early 2013); 31 Alternatives 33, 42-44 (Mar. 2013) (analyzing the US’s position on class arbitration) [subscription required]; and CPR News coverage here (reviewing AT&T Mobility v. Concepcion), here (providing an analysis on class actions given recent litigation on class arbitration), and here (reviewing coverage on American Express Co. v. Italian Colors).

The hearing also featured testimony from consumer groups, industry representatives, and members of the public, and a recording is expected to be made available soon on the CFPB website,  

Regardless of one’s views on mandatory consumer arbitration, it is important to ensure that undertakings such as the CFPB study and report, and Congress’s ongoing consideration of an Arbitration Fairness Act (AFA), remain limited to the consumer arena, and do not generate a general anti-arbitration backlash or result in overbroad legislation or rulemaking that might adversely affect the use of arbitration in business-to-business relationships, in which opposing parties generally have equal bargaining power in agreeing to arbitration and negotiating its terms, or in international business transactions, in which arbitration is often the only viable dispute resolution option. In its 2009 Recommendation 114, in response to an earlier version of the AFA, the American Bar Association expressly recorded its support for the use of international commercial arbitration, and opposition to “legislation or regulations that would reduce or discourage the use of international commercial arbitration to resolve disputes involving international business transactions or that would be inconsistent with established international commercial arbitration standards and practice,” see

Recent internet coverage of the CFPB hearing and preliminary findings includes:

 ·         Nicole Flatow, “Why The Roberts Court’s Anti-Consumer Decisions Are Even Worse Than They Seemed,”, Dec. 12, 2013, available at

·         Jenna Greene, “Consumer Agency Finds Arbitration Agreements Unpopular, Confusing,” The BLT: The Blog of LegalTimes, Dec. 12, 2013, available at

·          “It’s Forced Arbitration Day at the Consumer Financial Protection Bureau!,”, Dec. 12, 2013, available at

·         Paul Kirgis, “CFPB Preliminary Results on Study of Arbitration Clauses in Consumer Financial Contracts,” ADR Prof Blog, Dec. 12, 2013, available at

·         Patrick Lunstord, “CFPB Turns Focus to Arbitration Agreements in Credit Contracts,” InsideARM, Dec. 12, 2013, available at

·         Chris Moran, “CFPB Report Confirms That Banks & Credit Card Companies Are Taking Away Your Right To Sue,”, Dec. 12, 2013, available at

·         “Most Credit Card, Bank Checking Arbitrations Restrict Consumers’ Options,” eCreditDaily, Dec. 12, 2013, available at

·         Kerri Ann Panchuk, “CFPB Tackles Arbitration Clauses,” HousingWire, Dec. 12, 2013, available at

·         Rachel Witkowski, “CFPB Likely to Crack Down on Arbitration Clauses,” American Banker, Dec. 12, 2013, available at [subscription required].

·         Rachel Witkowski, “CFPB's Mind Already Made Up on Arbitration, Banks Charge,” American Banker, Dec. 12, 2013, available at [subscription required].

·         Will Carless, “Why More Consumers Are Shut Out of Court,”, Dec. 13, 2013, available at

·         John Oldshue, “CFPB Studying Arbitration Clauses in Financial Services Agreements,”, Dec. 13, 2013, available at

·         Juan Carlos Rodriguez, “CFPB Says 90% Of Banks' Arbitration Clauses Bar Class Suits,” Law 360, Dec. 13, 2013, available at [subscription required].

      - Cynthia Galvez, CPR Legal Intern