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April 26, 2012 – The Consumer Financial Protection Bureau is seeking input from the public as it begins work on a report to Congress on the use of pre-dispute arbitration agreements regarding consumer financial products or services.

The CFPB says it is not seeking comment on how it might exercise rulemaking authority over the use of such agreements, or on whether it even should regulate in this area. The request for information is for the report being prepared on what institutions are doing now.

The bureau is focusing on the impact on consumers and financial services providers of arbitration and arbitration clauses.

"Arbitration clauses are found in many contracts for consumer financial products," said CFPB Director Richard Cordray. "We want to learn how arbitration clauses affect consumers, and how effective arbitration is in resolving consumers' issues. This inquiry will help the Bureau assess whether rules are needed to protect consumers."

Arbitration is a way to resolve disputes outside the court system. The bureau notes that many contracts for consumer financial services products and services contain a pre-dispute arbitration clause stating that the parties generally agree to resolve all disputes about that product or service through arbitration, rather than through the court system.

For this study, the CFPB is seeking input on:

• the prevalence of arbitration clauses in consumer financial products and services;
• what claims consumers bring in arbitration against financial services companies;
• if claims are brought by financial services companies against consumers in arbitration;
• how consumers and companies are affected by actual arbitrations; and
• how consumers and companies are affected by arbitration clauses outside of actual arbitrations.

The CFPB's Federal Register notice should appear soon, and the questions posed will be more detailed. For example, the bureau wants to know how it should determine the prevalence of pre-dispute arbitration agreements in consumer financial services product markets other than credit card; whether it should look at particular terms used and how they have changed over time; whether and how it should analyze the types of claims consumers bring; whether service providers ever bring claims in this area; and what types of impacts the bureau should analyze.

Comments are due June 23. Another request for information could follow. The CFPB says that once the study is completed, it will consider whether conditions or prohibitions on the use of arbitration clauses would better protect consumers and "serve the public interest."