Comments Submitted to the Bureau of Consumer Financial Protection

The U.S. Chamber of Commerce Center for Capital Markets Competitiveness and the U.S. Chamber Institute for Legal Reform submitted this letter to the Bureau of Consumer Financial Protection in connection with the request for comments entitled “Request for Information Regarding Scope, Methods, and Data Sources for Conducting Study of Pre-Dispute Arbitration Agreements,” Docket No. CFPB-2012-0017.

EXCERPT FROM LETTER

The availability of arbitration as a system for resolving disputes is extremely important to both businesses and consumers. Arbitration of consumer disputes has been common practice for over two decades; there are perhaps hundreds of millions of consumer contracts currently in force that include arbitration agreements—many of them relating to consumer financial products or services. And the Supreme Court has time and again rejected the notion that the federal policy in favor of arbitration embodied in the Federal Arbitration Act (9 U.S.C. §§ 1-16) (“FAA”) was not meant to apply to consumers.¹

Moreover, there is broad recognition of the benefits of arbitration to both businesses and consumers. As Congress has explained, “’The advantages of arbitration are many: it is usually cheaper and faster than litigation; it can have simpler procedural and evidentiary rules; it normally minimizes hostility and is less disruptive of ongoing and future business dealings among the parties; it is often more flexible in regard to scheduling of times and places of hearings and discovery devices.’”² Indeed, for a large category of injuries suffered by consumers, the choice is “arbitration—or nothing.”³

For these reasons, it is imperative that the Bureau gather all relevant information before attempting to regulate under Section 1028. Indeed, Congress itself recognized the need to avoid regulatory activity based on intuition, generalized impressions, or misconceptions (whether based upon an idealized view unrelated to the “facts on the ground” or based upon negative stereotypes not grounded in the real world), and specifically required the Bureau to gather the relevant facts—and report to Congress—before embarking on any rulemaking effort.⁴

We commend the Bureau for requesting comments at this initial stage of designing the study, so that it may take into account the views of interested parties in determining the scope and elements of the study required by Section 1028, as well as the process that the Bureau should follow to ensure sufficient input by interested members of the public into the study process.

Our comments focus on three fundamental points:

• The Bureau should include in the study process sufficient additional opportunities for interested members of the public to submit relevant information.
• The Bureau cannot study arbitration in isolation; it must assess the benefits and costs of arbitration in comparison to the benefits and costs of the dispute resolution system that consumers and covered persons will have to use if arbitration is limited or prohibited—the judicial system.
• The Bureau’s draft study plan should identify the specific substantive issues that it will study, which should include all key issues relevant to assessing the relative benefits and costs of arbitration and judicial litigation.

Footnotes

1. The Court has clearly stated that “Congress, when enacting this law, had the needs of consumers, as well as others, in mind.” Allied-Bruce Cos. v. Dobson, 513 U.S. 265, 280 (1995). See also, e.g., Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006); Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 122-23 (2001) (citing Allied-Bruce); Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (2000); Rodriguez de Quijas v. Shearson/Am. Express, Inc. 490 U.S. 477 (1989); Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220 (1987).
2. Allied-Bruce Terminix, 513 U.S. at 280 (quoting H.R. Rep. No.97-542, at 13 (1982), reprinted in 1982 U.S.C.C.A.N. 765, 777); see also, e.g., AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1749 (2011) (“[T]he informality of arbitral proceedings is itself desirable, reducing the cost and increasing the speed of dispute resolution.”).
3. Theodore J. St. Antoine, Mandatory Arbitration: Why It’s Better Than It Looks, 41 U. Mich. J.L. Reform 783, 792 (2008) (discussing analogous situation of employees with low-dollar claims).
4. See Dodd-Frank Wall Street Reform and Consumer Financial Protection Act, Pub. L. No. 111-203, § 1028(a), 124 Stat. 1376, 2003-04 (2010).