DRI Opposes Consumer Financial Protection Bureau Rule on Arbitration

  • by DRI
  • Jul 28, 2016, 13:48 PM

Date: 8/22/2016

 

DRI Opposes Consumer Financial Protection Bureau Rule on Arbitration

 

CHICAGO ­– (August 22, 2016)— On Friday, August 19th, DRI submitted public comment on the Consumer Financial Protection Bureau’s proposed rule concerning arbitration agreements involving certain financial institutions. The comments may be found in their entirety here.  

As part of both its commitment to the civil justice system and to its members, DRI provided comment tightly focused on particular aspects of the proposed rule which sought to regulate in-court activities of covered financial institutions that are often represented by DRI members.  That part of the proposed rule would, if adopted, make it a violation for a covered financial institution “to rely in any way” upon, a pre-dispute arbitration agreement in connection with any aspect of a case in which plaintiffs seek relief on a class-wide basis unless and until the court system has determined whether a class action could be maintained. 

DRI’s comment first challenged the Bureau’s flawed premise that class actions must efficiently deter violations of consumer law because of the overall “value” of class action settlements.  Many of these settlements result in no meaningful recovery for class members.  Moreover, DRI’s experience suggests that class actions are often settled for reasons having far more to do with costs of litigating and potential risk than on actual determinations on the merits of the underlying claims asserted.  As a result, DRI does not believe that the Bureau ought to be creating a rule based on attaching such a significant deterrent effect to the class action device.

DRI also does not believe the Bureau ought to be trying to regulate the in-court conduct of covered financial institutions and the lawyers who represent them.  The court system itself generally regulates in-court conduct and there is no good reason to vary from that in this area.  In addition, the proposal creates so many questions about the types of in-court conduct that would or would not be permitted by the rule that the overall level of uncertainty is counter-productive.  DRI suggests that the Bureau reconsider its approach to limit its involvement to the area in which it has some expertise – regulation of the institutions themselves – and leave regulation of in-court conduct in the hands of the court system.

“CFPB regulation of in-court evidence, procedure and conduct raises separation of powers concerns,” said DRI president Laura E. Proctor. “It also may well exceed the authority conferred by the Dodd-Frank Act, which does not purport to grant the CFPB authority over the conduct of judicial proceedings.. DRI urges the CFPB to focus more effort on eliminating ambiguity in the statutes and regulations it enforces so as to provide a clearer path to statutory and regulatory compliance, and litigation avoidance, for the financial institutions it regulates.”

 

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