The Competitive Enterprise Institute today criticized a new rule from the Consumer Financial Protection Bureau (CFPB) banning financial industry companies from using mandatory arbitration clauses to stop class action lawsuits. The new rule would encourage more such lawsuits.
"This regressive attack on freedom of contract transfers wealth from consumers to wealthy attorneys," said Ted Frank, director of CEI's Center for Class Action Fairness.
“The CFPB has disregarded vast data showing that arbitration more often compensates consumers for damages faster and grants them larger awards than do class action lawsuits. This regulation could have particularly harmful effects on FinTech innovations, such as peer-to-peer lending," said John Berlau, CEI senior fellow.
CEI submitted public comments to the CFPB last year raising serious concerns about the rule. Instead of a ban on arbitration, the CFPB could take other steps to help consumers, such as making the terms of arbitration clauses opt-out, the CEI comments explained. View the comments to CEI Opposes Regulator Limits on Arbitration Option for Financial Products.