CFPB Examining Mandatory Arbitration Clauses For Financial Products
CFPB Examining Mandatory Arbitration Clauses for Financial Products
So far, the Consumer Financial Protection Bureau seems like a young child who can’t sit still, charging around the house, playing with one toy or another for a few minutes at a time before taking off in another direction. Since Richard Cordray was appointed as the head of the CFPB by President Barack Obama in January, the new bureau has started investigations on everything from student loans, to credit card policies, to payday loan lenders, without getting very deep into any of them.
Cordray has announced that the Bureau will now be taking consumer comments regarding mandatory arbitration policies that accompany some financial products like checking accounts, credit cards, and payday loans. So maybe there is a method to the madness after all.
These mandatory arbitration policies are used to resolve disputes between consumer and service provider in lieu of settling the disagreement in court.
The CFPB will conduct a study, mandated by the Dodd-Frank Wall Street Reform Act, to review whether or not consumers are negatively affected by mandatory arbitration clauses. There is no telling when the Bureau will conclude its investigation, but they do have the right to ban the use of arbitration clauses, or write rules restricting them, if their study provides evidence to support the rule change.
Congress Republicans fought Cordray’s appointment for months, hoping to leverage his approval into changes in the Bureau’s charter to reel in what they believe to be unsupervised authority to regulate and monitor non-bank financial institutions, and write or rewrite laws and regulations for these institutions. Republicans are very wary and critical of the CFPB’s authority, which they believe has unprecedented power to manipulate the economy, and threatens the idea of an unregulated economy that they believe is vital to the resurgence of Wall Street.
President Obama has been clear in his goal to rebuild Wall Street with an inherent transparency that benefits the consumer and engenders confidence instead of skepticism. While Cordray has so far only nibbled at the different foods on his plate (metaphorically speaking) he will soon hopefully focus his attention and start tackling some of the issues he has been reviewing.