The Consumer Bankers Association submitted a public comment in opposition of the Consumer Financial Protection Bureau’s proposed arbitration rule yesterday, just under the wire. The public comment period for the proposed rule also ended yesterday.
“The proposed rule should not be made final, as proposed, because it is not in the public interest or for the protection of consumers,” CBA said in its comment letter. “And it is not consistent with the Bureau’s March 2015 empirical Study of consumer arbitration. It should be withdrawn and not re-proposed unless it is consistent with the statutory parameters.”
The guidance – proposed in early May – would prohibit financial companies from including mandatory arbitration clauses in contracts with consumers as a way to block class-action lawsuits, which would direct customers into private negotiations to resolve disputes.
In its letter, CBA argued that if finalized, an additional 6,042 class actions that will be brought every five years and incur between $2.62 billion and $5.23 billion, on a continuing five-year basis, in defending against those additional cases.
The trade group also argued that the bureau did not “as required, consider alternatives such as allowing enforcement of class action waivers for matters that the entity has identified and resolved prior to a class action being filed.”
At the time the open comment period closed, the proposed rule received 2,495 comments. For comparison. the “Defining Larger Participants of the Automobile Financing Market” rule, when proposed in September 2014, received 30 comments.
Read CBA’s full letter here.
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