What's a Regulator to Do? Mandatory Consumer Arbitration, Dodd-Frank, and the Consumer Financial Protection Bureau

Abstract

The Dodd-Frank Wall Street Reform and Consumer Protection Act addressed fundamental consumer protection issues involving securities, banking, and indeed the US economy. The act, known as Dodd-Frank, also contains language governing the use of predispute arbitration agreements (PDAAs) in consumer financial and investor contracts. Dodd-Frank created the Consumer Financial Protection Bureau (CFPB) and charged the new bureau with studying the use of PDAAs in consumer financial transactions and addressing PDAAs “if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers…” This article examines the CFPB’s mission under Dodd-Frank as it relates to mandatory use of PDAAs in consumer financial contracts. Often called “mandatory arbitration” and more recently “forced arbitration,” the subject is perhaps more nuanced than the reader may realize. The article covers what CFPB must do under Dodd-Frank, what it may do if it so chooses, and what the author thinks the CFPB should do. Predicting what CFPB will do and whether it will succeed will not be easy. As that great philosopher Yogi Berra said, “It’s tough to make predictions, especially about the future.”