For those readers who have failed to parse the nuances of the CFPB’s 728-page report to Congress on mandatory arbitration provisions in consumer contracts (mandated by Franken-Dodd), Ballard Spahr has you covered. They’ve not only read it, they’ve distilled the essence of the CFPB’s analysis of the reams of statistics it compiled into the phrase “figures don’t lie, but liars figure” (my characterization, not necessarily the law firm’s).
To absolutely no one’s surprise, the CFPB does not like consumers being obligated to arbitrate their claims rather than exercising their Gaia-given right to send the children of class-action plaintiff’s attorneys to an Ivy League school for both undergraduate and post-graduate degrees. The brainchild of a demagogue who not only created a Native American ancestry for herself out of the whole cloth of “grandma always told me,” but who also awakens in the wee hours from fevered dreams of toddlers falling into punji-stake-lined pits of “tricks and traps” set by commercial banks and their fellow travelers, the CFPB looks at the statistics regarding consumer arbitration and sees what its creator sees: unremitting evil.
Unfortunately for the CFPB’s ideological imperative, Ballard Spahr concludes otherwise: “In fact, the study confirms that arbitration does benefit consumers.”
Please read the entire client alert. For those who have actual lives, here are some highlights.
- “The data demonstrate that arbitration is faster and more economical than litigation.”
- The costs of arbitration borne by a consumer are less than the filing fees for a lawsuit.
- “Even when consumers initially paid a modest share of the fees, in 56 of 123 arbitrations examined by the study, they were reimbursed in the arbitrator’s award for at least some of the fees.”
- “According to the CFPB’s own statistics, arbitration was thus a factor in only 8 percent of the class actions studied.”
- “[I]n 60 percent of the class actions, the putative class members got nothing. And none of the class actions went to trial. By contrast, of 341 cases that were resolved by an arbitrator, in-person hearings were held in 34 percent of the cases, and there were at least 146 cases in which arbitrators reached a decision on the merits of the parties’ claims. The CFPB has it backward—it is class actions that are a barrier to consumers obtaining meaningful relief in arbitration.”
- “In arbitrations where consumers obtained relief on their affirmative claims and the CFPB could determine the award amount, the average grant of relief to the consumer was $5,389, meaning an average recovery of 57 cents for every dollar claimed. Based on 73 of 74 individual federal court claims in which a judgment was entered for the consumer, the average amount awarded to the consumer was $5,245. So consumers fare just as well in arbitration as in court, and perhaps even better.”
- Class action plaintiffs’ lawyers, on the other hand, made out like bandits. “Attorneys’ fees awarded to class counsel in settlements during the period studied amounted to a whopping $424,495,451.”
- “[T]he studies Achilles’ heel: like the CFPB’s preliminary study issued in December 2013, it fails to examine the actual experiences of consumers who have gone through arbitration. In ascertaining whether consumer arbitration is in the public interest, real consumers’ actual experiences with arbitration and class action proceedings are at least as important as a telephone survey asking randomly selected consumers about their awareness of arbitration clauses in their credit card contracts, if not more so.”
The “fact-driven” CFPB apparently ignores the facts. Instead, it opts for conclusions that are best summarized by the following representative headline from the left-leaning (i.e., “mainstream”) magazine Time: “CFPB Says Mandatory Arbitration is Bad for Consumer.
Although the CFPB promises to meet with all “stakeholders” before adopting regulations on these provisions, that’s like a vigilante posse in Wyoming during the 1880s saying they’d give a cattle rustler a fair trial before they hung him. Expect the CFPB to try to pound a stake through their heart. Meetings are window dressing to paper over a foregone conclusion with the appearance of due deliberation.