Consumer Financial Protection Bureau (CFPB) Anti-Arbitration Rule Runs Contrary to Interests of Consumers It Claims to Protect
The CFBP’s final arbitration rule is yet another example of that agency using a closed process to assure a predetermined outcome that is contrary to the best interests of the financial consumers that it professes to protect. The agency ignored calls from lawmakers, the public, and noted academics for it to refrain from spurring a tsunami of litigation and let disputes be handled via a proven and far less expensive method – arbitration.
CFPB’s anti-arbitration rule subjects hundreds of millions of consumers to burdensome new regulations that will make business and consumer poorer – enriching only the lawyers who handle the litigation. The negative impact will be felt by all kinds of business – not just banks and other financial institutions. But trial lawyers – by the CFPB’s own estimation – will rake in average fees of more than $1 million per settled case even though consumers average a gain of only $32 in each case. The injustice of that is blatantly obvious.
This rule threatens to impose huge costs on the payment processing industry, including ATPC’s members many of which are either headquartered or have operations in Metro Atlanta’s “Transaction Alley.” The “Transaction Alley” industry cluster now represents more than 60 percent of all companies in the U.S. payments processing industry and process nearly 75 percent of the more than $7.4 trillion in electronic payments annually in the U.S. alone.
It is worth noting that the anti-arbitration rule – coming as it does, when the transition to a new Administration is not yet complete – violates the long-standing tradition of federal agencies refraining from major rule-making during such transition periods. Furthermore, the agency operates under a constitutional cloud, with the only two appellate judges to consider the question having found the Bureau’s structure unconstitutional.
ATPC urges Congress to take immediate action and overturn this overreaching rule.