Manatt’s Richard Gottlieb, co-chair of the firm’s financial services group, spoke to American Banker about the recent congressional defeat of the Consumer Financial Protection Bureau’s (CFPB) arbitration rule.
The publication noted that the CFPB could have avoided repeal if the bill, which banned all mandatory arbitration clauses from financial contracts, had been more tempered. If the CFPB had scaled back the rule and focused on bringing transparency to the individual arbitration process, it might have been able to achieve increased arbitration monitoring, benefiting consumers and consumer advocates.
“In an era in which the GOP runs both Congress and the White House, how could the CFPB not have seen the benefit of a more pragmatic approach that would have benefited consumers, and not just plaintiffs’ lawyers?” Gottlieb told the publication. “The CFPB arbitration rule demonstrates blind support for the failed class action device as an engine for change.”
One option for tempering the bill could have been requiring all arbitration provisions to have consumer-friendly features. The CFPB was authorized under the Dodd-Frank Act to look at the issue of consumer harm from arbitration practices, including whether class action waivers essentially force consumers into arbitration.
“Instead of targeting practices that harm consumers, or working to make class actions more beneficial to consumers, the CFPB overreached by using the Dodd-Frank legislation to effectively ban class action waivers outright,” Gottlieb said. “From an industry perspective, this smacked of bias for a plaintiffs’ bar that has done few favors for the consumers the CFPB was created to protect.”
Read the article here.