The U.S. Consumer Financial Protection Bureau (CFPB)’s proposal prohibiting financial services firms from including class action waivers in arbitration agreements has another critic: The Network Branded Prepaid Card Association (NBPCA) has sent a letter to the federal agency about the “negative” impacts the rule would have on the prepaid industry.
In a letter dated Aug. 22, the prepaid trade group advanced the following points:
- The Proposed Rule exceeds the authority granted to the CFPB by Section 1028 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”);
- Rather than study how the arbitration process benefits consumers, the CFPB chose to focus its study on class actions;
- The CFPB did not adequately consider the costs of their proposal on consumers or financial services providers; and
- The Proposed Rule ignores the CFPB’s empirical study of arbitration agreements, which clearly details that arbitration is a faster, less expensive, and a far more effective way for consumers to resolve disputes with companies when compared with class action litigation.
The CFPB proposal, unveiled on May 5 before a CFPB field hearing in Albuquerque, N.M, will not ban arbitration clauses, but covered institutions will be restricted from including class action waivers in their arbitration agreements and arbitration clauses will be required to contain notices to that effect. The NBPCA finds fault with the federal agency’s arbitration goal.
“The NBPCA continues to believe that the CFPB’s primary goal is to significantly restrict or eliminate the use of pre-dispute arbitration clauses in consumer financial agreements without banning them outright,” the trade group said. “In addition, we ultimately believe that the Proposed Rule will actually harm consumers by depriving them of what has proven to be a broadly applicable, effective, inexpensive, and convenient method of resolving disputes, in favor of a more expensive, less convenient alternative which is not available to all consumers for all claims.”
The CFPB proposal already has attracted criticism in the U.S. House.
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