CFPBOne of the largest issues to loom over the class action battlefield in the past decade has been the use of arbitration clauses in consumer contractual relationships.  As many know, and as discussed in our sister blog, Workplace Class Action Blog, the United States Supreme Court’s seminal 2011 decision in AT&T Mobility v. Concepcion became a guiding light for many businesses on how, and when, to utilize arbitration provisions in their agreements.   More recently, as discussed in a previous post, in 2013, the Court provided further guidance regarding waiver of class arbitration in American Express Co. v. Italian Colors Restaurant.  The debate since has raged between consumer advocacy groups and businesses that requiring consumers to arbitrate favors businesses and artificially limits recovery for consumers.  Silent in that debate, however, has been any empirical data to support the claim– until know.  On March 10, 2015, the CFPB released the final results of its consumer arbitration study.  Not surprisingly, the report is heavily critical of the arbitration process and supportive of allowing consumers to pursue claims in federal court using the Rule 23 class vehicle.

The Study

Section 1028 of the Dodd-Frank Act authorizes the Consumer Financial Protection Bureau (“CFPB”) to regulate or even eliminate arbitration provisions from consumer financial products and services agreements, if it determines such action is “in the public interest and for the protection of consumers.”  To that end, starting in 2012, the CFPB set about compiling data to support this goal.  The 728-page report analyzed nearly 850 consumer finance agreements, 1,800 consumer arbitration disputes, 3,400 individual federal court lawsuits, 42,000 credit card cases filed in small claims court and 420 class action settlements filed in federal courts.   The results, again heavily sloped in favor of meeting the initial objective, include the following findings:

  • Tens of millions of consumers are covered by mandatory arbitration agreements
  • Arbitration clauses were present in 53 percent of credit cards studied, 92 percent of prepaid cards and 86 percent of private student loan lenders
  • Approximately 600 arbitration were filed per year between 2010 and 2012 in six different consumer finance markets
  • There is no evidence that arbitration clauses lead to lower prices for consumers
  • Over 90 percent of the arbitration agreements studied contained class action waivers
  • Class action settlement provide substantially more relief to consumers than arbitration awards
  • Over 75% of consumers surveyed said they were not aware of arbitration clauses in their agreements
  • Less than 7% of consumers surveyed knew that arbitration clauses prevent them from suing


 In his “Chapters from My Autobiography,” Mark Twain wrote “Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: ‘There are three kinds of lies: lies, damned lies, and statistics.'”

While the CFPB’s omnibus study appears to be an extensive work, compiling years of data and thousands of data points, it must be remembered that the genesis of this study was to support the CFPB’s charge of regulating or even eliminating arbitration provisions from consumer financial products and service agreements.  Nonetheless, with this data, it seems inevitable that the next word we can expect to hear from the CFPB will be rulemaking efforts to effectuate this goal.  While it is unclear whether the CFPB intends to severely limit the use of arbitration provisions in consumer financial agreements or propose an outright ban of such provisions, it is certain that the landscape for consumer arbitration agreements and class action waivers will change significantly in the near future.

As always, we will continue to keep you abreast of these events as they unfold.