CBA Urges Congress To Oppose Legislation Limiting Americans’ Ability To Pursue Arbitration Agreements

In a new letter sent today to the Senate Banking Committee ahead of a scheduled hearing next Tuesday, Consumer Bankers Association (CBA) President & CEO Richard Hunt urged Congress to reject any legislative proposal seeking to eliminate the ability of hardworking families to pursue arbitration agreements when settling claims disputes.

Overwhelmingly, disputes between companies and their customers are resolved through informal channels. As CBA states in the letter, though, the ability to pursue an arbitration agreement has been guaranteed under law for nearly a century and remains a valued, cost-effective alternative tolitigation in those rare instances when formal action is required to settle a dispute:

“Arbitration has been an established and well-regarded dispute resolution tool for all participants. […] For many consumers, pursuing litigation is complicated, time-consuming and requires a lawyer to navigate the process. […] Abolishing the ability to willingly enter intopre-dispute arbitration agreements is contrary to the public interest.”

In 2015, an empirical study conducted by the Consumer Financial Protection Bureau (CFPB) reaffirmed that arbitration remains a less costly, more time-efficient alternative to litigation while also yielding significantly higher returns for consumers. Calling on Congress to consider the impact prohibiting arbitration would have on hardworking families, CBA said:

“As the study showed, trial attorneys are in a significantly better position to benefit from a prohibition on arbitration than consumers. […] We urge Congress to reject any proposal that would limit options for consumers and preserve the ability to choose alternative dispute resolution methods instead of forcing all future parties into expensive and time-consuming court battles.”

To read the full letter, click HERE.

Background

Arbitration has been used as a method of amicably resolving disputes for over 80 years. In many cases, arbitration has benefited consumers by providing quicker and less expensive alternatives tolitigation, as evidenced by the following key findings from the 2015 CFPB study mentioned in the letter above:

• Arbitration is up to 12 times faster than litigation in providing consumers with a resolution totheir dispute.
• Arbitration provides 166 times more in recovery when compared to litigation, as consumers obtained an average of $5,389 in arbitration versus $32.35 in class actions. The trial lawyers managing these cases, however, received approximately $424 million, an average of more than $1 million per case.
• Over 60 percent of class actions resulted in no relief for putative class members, as these cases were either settled individually or withdrawn by the plaintiff. In addition, only 12 percent of class actions even obtained a final class settlement.

CBA has advocated for lawmakers to oppose attempts to ban pre-dispute arbitration, recognizing the impact such limits would have on consumers and small businesses who value the efficiency and cost-savings it provides.

In 2017, CBA served as a leading voice in opposition to a CFPB Rule which would have deprived consumers of their longstanding ability to pursue arbitration agreements. To read CBA’s statement after the rule was repealed through a Congressional Review Act resolution, click HERE.

To read CBA’s letter sent last year to members of the House Committee on the Judiciary ahead of a scheduled hearing to debate the merits of arbitration, click HERE.