As the Consumer Financial Protection Bureau prepares to collect comments on its proposal to ban class action waivers, House lawmakers at a hearing yesterday discussed whether the court system or arbitration best serves aggrieved customers, the National Law Journal reported today. Rep. Randy Neugebauer (R-Texas) said that the CFPB’s controversial proposal is inconsistent with its arbitration study and would effectively eliminate an alternative resolution process that “lowers the barrier to bring disputes.” Neugebauer, the chairman of the House Financial Services Financial Institutions and Consumer Credit Subcommittee, said that arbitration provides “efficient, expedited” relief to consumers. But Rep. Lacy Clay (D-Mo.), argued that arbitration can be costly for consumers — and often result in little to no relief. Among the four panelists testifying at the hearing were F. Paul Bland, executive director of Public Justice, and Mayer Brown partner Andrew Pincus, who represented AT&T Mobility LLC in the landmark U.S. Supreme Court case that established a right for businesses to enforce class action waivers and force consumers into arbitration. Since the court’s 5-4 decision in AT&T Mobility v. Concepcion, forced-arbitration clauses have become commonplace in contracts for loans, credit cards and other financial products. Read more.
To read the prepared witness testimony from yesterday’s hearing, please click here.
In related news, the Consumer Financial Protection Bureau highlighted the perils of vehicle title loans in a new report, as it gears up to propose a sweeping new rule to rein in small-dollar loans carrying hefty interest rates, the Wall Street Journal reported yesterday. One in five borrowers of vehicle title loans end up having their cars and trucks seized while many others fall into cycles of debt as they repeatedly roll over their loans, unable to make repayments, according to the analysis released yesterday. Vehicle title loans typically are an expensive form of credit, backed by a stake in the consumer’s vehicle. The typical title loan is about $700, with an annual loan rate running around 300 percent, the CFPB said. Read more. (Subscription required.)
