Richard Cordray, Director of the Consumer Financial Protection Bureau, has positioned himself as the Boogeyman that financial companies fear this Halloween season. Earlier this month, the CFPB outlined the proposals under consideration for regulating arbitration in the consumer financial industry. The proposals address the availability of class actions — as was widely expected — but also express concern about individual financial arbitrations and suggest those will be monitored. [I am late to the party on this topic. But I had to consider it carefully over butterbeer in Orlando…]

To set the table, the CFPB describes its take-aways from the arbitration study it published in March. In particular, the study led to two concerns:

• “[T]he Bureau is concerned that arbitration agreements effectively prohibit class proceedings, including litigation, and that they prevent many consumers from obtaining remedies when they are harmed by their providers of consumer financial products or services” and
• “The Bureau is concerned [] that pre-dispute arbitration agreements that require arbitration of individual claims may have in the recent past led to harms to many consumers and is further concerned that these types of harms may recur.” “The Bureau is concerned that there is a potential for significant consumer harm if arbitration agreements were to be administered in biased or unfair ways.” [Here CFPB cited the NAF example.]

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