The CFPB’s Arbitration Agreements Rule (“Rule”), which was finalized on July 18, 2017, came under fire today in a report released by the U.S. Department of Treasury (“Treasury”). The 18-page report details the “extraordinary costs” the Rule will impose if implemented—more than $500 million in additional legal defense fees, $330 million in payments to plaintiffs’ lawyers, and $1.7 billion in additional settlements. The report is a complete takedown of the CFPB’s years-long efforts concerning arbitration, questioning the CFPB’s 2015 Congressionally-mandated arbitration study, the data relied on by the Bureau, and the CFPB’s overall analysis of arbitration-related information. In addition to a detailed criticism of the costs imposed by the Rule, Treasury’s study highlighted other defects:
- According to the Bureau’s own data, class members obtain no relief in the vast majority of consumer class actions.
- When class relief is ordered, only a few affected consumers actually pursue settlement funds.
- Plaintiffs’ attorneys will be the biggest beneficiaries of the Rule, which Treasury characterized as a “large wealth transfer” to those lawyers.
- More prominent disclosures concerning arbitration would benefit consumers more than a ban—an avenue the Bureau failed to seriously consider.
- The Bureau also overlooked the costs of meritless litigation that the Rule will generate.
- The Bureau asserted that the Rule will improve compliance with federal consumer financial laws but offered nothing to credibly support this claim.