Last week, the Consumer Financial Protection Bureau issued the final version of its administrative rule concerning arbitration clauses in consumer contracts.
The rule, found here, contains a provision for an online arbitration database to be administered by the bureau, similar in design to its current online complaint database. Such a database would likely be controversial if the arbitration rule survives likely opposition on Capitol Hill and in the courts.
The database provision is buried deep in the 775-page rule. The rule would require all regulated companies to submit records about all arbitration cases to which they were a party, including any awards given. The CFPB would then publish the information “with appropriate redactions” on its website, as they now do with complaints.
CFPB Director Richard Cordray said the publication of the records “will promote transparency and give consumers, providers and other regulators more insight into how arbitration works.” Cordray said financial services providers will scrub the records of personal information and the CFPB would begin posting them online beginning in July 2019. That is a full year after Cordray’s five-year term is set to expire. The CFPB also said the publication of the records would help academic researchers with their analyses of arbitration.
The CFPB’s new rule, which calls for restricting arbitration agreements that block consumers from filing class actions, immediately drew criticism from the financial industry. The U.S. Chamber of Commerce has argued the rule would effectively shut down a “cheaper and faster” form of dispute resolution for consumers, as companies would no longer subsidize arbitration if they were still faced with the cost of defending against class actions.
An arbitration database would also likely draw considerable resistance. A recent article suggests that databases like the one proposed by the CFPB rule are unpopular with the affected industries. The U.S. Labor Department this year suspended an Obama-era rule that required companies to electronically report their injury and illness records so that they could be made available to the public. The U.S. Treasury Department has called for reducing access to the CFPB’s consumer complaint database, arguing it lacks “appropriate safeguards.” Instead, the agency suggested the database be made available only to state and federal agencies.
“In contrast to commenters that viewed the possibility of increased scrutiny by regulators or plaintiff’s attorneys as a negative outcome from the monitoring rule, the bureau believes that the increased transparency will tend to increase consumers’ ability to seek redress for legal violations, providers’ incentives for compliance and general public confidence in the orderly operation of the markets,” the CFPB said.