CFPB Releases Preliminary Arbitration Research
Washington — The Consumer Financial Protection Bureau (CFPB) released preliminary research on the use of arbitration clauses in connection with consumer financial products and services. The study found that more than 90 percent of the arbitration clauses examined by the bureau explicitly bar consumers from participating in class arbitrations.
“If you were to look in your wallet right now, the chances are high that one or more of your credit cards, debit cards or prepaid cards would be subject to a pre-dispute arbitration clause,” said CFPB Director Richard Cordray during a field hearing on arbitration in Dallas today.
The bureau was created with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Under the act, the CFPB is required to study the use of pre-dispute arbitration contract provisions in connection with the offering of consumer financial products or services, and to provide a report to Congress. The preliminary research released Wednesday is part of an ongoing study.
Consumer advocates have long argued that arbitration clauses hurt consumers, as arbitrators often side with the company or service provider during a dispute. The CFPB’s research found that arbitration clauses were also significantly more daunting to consumers than the credit card agreements associated with them.
“Regardless of who was using them, 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,” Cordray noted. “In fact, in every case, the rest of the credit card contract scored better in terms of readability than did its arbitration clause considered alone.”
The research concluded that very few consumers use arbitration at all, at least when compared to the number of consumers involved in lawsuits and class actions. In the second phase of the bureau’s study, “we will look to see what happens to arbitration filings and endeavor to compare what we see happening in arbitration to what we see happening in litigation, including class litigation,” Cordray added.
Earlier this year, Tom Hudson predicted that the CFPB would ultimately eliminate arbitration agreements from auto transactions as a result of its review of such agreements. Like other auto industry members, he suggested that the CFPB’s first move would be to eliminate arbitration agreements from auto transactions. Instead, the bureau targeted rate markups first.
“The smart money says we’ll see an across-the-board prohibition of arbitration agreements in connection with consumer financial services,” Hudson wrote in February.
The research released this week did not touch on auto finance, instead focusing on credit cards and bank cards.
“Another thing I noted was that the bureau’s listing of the various anti-consumer features, or lack of pro-consumer features, of the arbitration agreements that it had found in these other product areas will make the arbitration provisions in common use in the vehicle finance market look very consumer-friendly by comparison,” Hudson said.
More Industry

Kia Closes Out Summer With a Bang
Its U.S. subsidiary broke multiple records in August, in part due to a surge of demand for hybrids models.
Read More →
Indiana Dealership Changes Hands
A 30-year-old Ford dealership in Indiana has a new owner and will soon be undergoing renovations to meet manufacturer requirements.
Read More →
Texas Dealership No Longer in the Family
The Ford store, a longtime cornerstone of the Houston market, is now part of one of the fastest-growing U.S. auto groups.
Read More →
Genesis Grows California Presence
The Cardinale Automotive Group opened its third Genesis rooftop in the Golden State, Genesis of San Bruno, a stand-alone dealership serving the San Francisco Bay Area.
Read More →
August Auto Sales a Mixed Bag
An early forecast shows strong business despite consumer hurdles, and hybrids are a big piece of their affordability coping strategy.
Read More →
EV Market Humming Along
July sales show steady growth as the segment stabilizes from last year’s artificial surge following pullback of federal support.
Read More →
Auto Loan Delinquency Rates Stabilize
Auto loans are a main driver of nonmortgage consumer debt, but delinquency rates stabilized in the second quarter across all credit risk tiers.
Read More →
EV Sales Recover in Q2
The EV sales roller coaster continues as numbers show improvement, but industry experts predict a year-over-year third-quarter decline and fourth-quarter jump.
Read More →
The Cheapest Hybrids to Fuel
The powertrain is increasing in popularity, in no small part due to its fuel economy. A new report lists the most efficient hybrids on the market.
Read More →
Hybrids and SUVs Gaining Ground
The most recent Kelley Blue Book Brand Watch found that only two nonluxury brands increased in shopper consideration, buoyed by their hybrid and SUV offerings.
Read More →