Debt Relief Industry Regulation / Legislation

Debt Relief Industry May Have Tough Time Pushing Back Against CFPB Rule

Written by Steve Rhode

Yesterday I wrote about how the Consumer Financial Protection Bureau (CFPB) is proposing a rule that remove contract clauses on binding arbitration and the prevention of class action suits in debt relief contracts. You can read that article here.

If the debt relief industry wants to tamp down or prevent these new rules, someone is going to have to stand up and comment about the proposals.

But here is one early comment that supports the proposal that represents what debt relief companies are going to have to deal with in opposition. A large number of law professors, 210 to be exact, submitted a group comment in support of the CFPB rule proposal.

Here are some interesting bits from their public comment.

“The benefits and detriments of both forced arbitration and class actions have been debated vigorously for over twenty years in academia, as well as in litigated cases, Congressional hearings and among the general public. Although some good empirical work has been done on these issues, scholars have consistently asserted the need for more and better data-driven studies. Too often, heated discussions have been based on speculation, rather than data; this is especially problematic given the largely private world of confidential arbitration. Accordingly, we were very pleased when Congress, in enacting the Dodd-Frank Wall Street Reform and Consumer Protection Act, mandated in Section 1028(a) that the CFPB study “the use of agreements providing for arbitration of any future dispute . . . in connection with the offering or providing of consumer financial products or services. . . .” After soliciting suggestions on how to conduct such a study, receiving and incorporating ideas from many corners, and spending three years collecting and analyzing massive amounts of data, the CFPB produced a comprehensive and impressive report in March 2015.”

“Others among us believe that using pre-dispute arbitration agreements in the consumer context may not be harmful, or may even be beneficial, apart from the class action prohibition. And, still others among us are not sure where they stand on the desirability of banning forced arbitration in this context. Nonetheless, these differences in our perspectives do not undercut our strong agreement that the CFPB is right to both prevent companies from using arbitration to take away financial consumers’ opportunity to participate in class proceedings and require the submission of additional data and information that will allow the agency to further study this important area. We believe that the proposed regulations are critically important to protect consumers and serve the interests of the American public.”

READ  What About S.3264 Passing? What Are The Odds?

“Nor is there reason to believe, as some have suggested, that consumers would bring more individual arbitration claims against financial service providers if only they were better educated about the purported virtues of arbitration. Rather, a consumer who was truly well-informed about consumer arbitration would likely conclude that – given the financial and other costs of arbitration and the limited likelihood of success — it makes absolutely no sense to file an individual arbitration claim. Thus, if we want to ensure the enforcement of substantive laws protecting consumers we need to preserve consumer class actions.”

“Nor do we believe, as some have suggested, that on-line claims systems or social media can currently take the place of consumer financial class actions. Such creative ideas are worth exploring, certainly, and may benefit some groups of consumers, particularly for simple and obvious claims. However, financial consumers who do not know they have been harmed, do not know the harm is illegal, and do not have the time or energy to be educated, will fail to take advantage of informal claims procedures; and on-line arbitration systems cannot help consumers or their advocates amass the expert testimony, legal research, or statistical studies sometimes necessary to prove financial harm. Thus, to the extent we allow financial services companies to use arbitration to eradicate consumer class actions, we are allowing these companies to insulate themselves from enforcement of our laws. This harms not only individual consumers but also the public at large.”

You can read the full comment document, here.


Get Out of Debt Guy – Twitter, G+, Facebook

I can always use your help. If you have a tip or information you want to share, you can get it to me confidentially if you click here.




About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

Share a Comment / Leave a Reply

Scroll to Top
%d bloggers like this: