Texas Border Business
By the US Chamber of Commerce
Last week, the Consumer Financial Protection Bureau proposed establishing a public registry of terms and conditions in millions of consumer contracts.
Why it matters: This is yet another attempt by the bureau to eliminate arbitration agreements that benefit consumers.
Details: For consumers resolving legal disputes, arbitration is a much better alternative than class action litigation.
• A study published by the bureau in 2015 found that when class action suits proceed to trial, trial lawyers make $1 million per case, and only about 4% of consumers ever take the steps necessary to claim class action awards. The awards average about $32.
• The study also showed that almost 90% of cases filed as class actions result in no class recovery, and consumers receive 170 times more financial compensation in arbitration than they do in class actions
Be smart: The bureau ignored arbitration’s benefits and banned arbitration clauses in financial contracts in 2017. However, Congress struck down the rule later that year through the Congressional Review Act.
• Under that law, the bureau is prevented from issuing a “substantially similar” rule, meaning this effort to issue a new rule is legally dubious
Bottom line: Numerous studies have shown that arbitration produces better outcomes for consumers than class action lawsuits that only serve the interests of the trial bar.
• If implemented, this proposal would pave the way for the bureau to punish companies for common practices that benefit both businesses and consumers by protecting them from the costs and reduced competition associated with excess litigation.
