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    CONSUMER FINANCIAL PROTECTION BUREAU STUDY FINDS THAT ARBITRATION AGREEMENTS LIMIT RELIEF FOR CONSUMERS

    The Consumer Financial Protection Bureau released a study indicating that arbitration agreements restrict consumers’ relief for disputes with financial service providers by limiting class actions. The report found that, in the consumer finance markets studied, very few consumers individually seek relief through arbitration and the courts, while millions of consumers obtain relief each year through class action settlements. Arbitration Clauses by the Numbers Tens of millions of consumers are covered by arbitration clauses. The CFPB looked at arbitration clauses in six different consumer finance markets: credit cards, checking accounts, prepaid cards, payday loans, private student loans, and mobile wireless contracts. • 53 percent: The market share of credit card issuers that include arbitration clauses. • 44 percent: While fewer than 8 percent of banks and credit unions include arbitration clauses in their checking account agreements, those who do represent 44 percent of insured deposits. • 92 percent: The percentage of prepaid card agreements the CFPB obtained that are subject to arbitration clauses. • 86 percent: In the private student loan market, 86 percent of the largest lenders include arbitration clauses in their contracts. • 99 percent: The Bureau was able to obtain data on payday loan agreements in California and Texas. In those states, over 99 percent of storefront locations include arbitration clauses in their agreements. • 88 percent: Among mobile wireless providers who authorize third parties to charge consumers for services, 88 percent of the largest carriers include arbitration clauses. Those providers cover over 99 percent of the market. Overview Arbitration is a way to resolve disputes outside the court system. In recent years, many contracts for consumer financial products and services have included a “pre-dispute arbitration clause” stating that either party can require that disputes that may arise about that product or service be resolved through arbitration, rather than through the court system. Where such a clause exists, either side can generally block lawsuits, including class actions, from proceeding in court. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) mandates that the CFPB conduct a study on the use of pre-dispute arbitration clauses in consumer financial markets. The Dodd-Frank Act also prohibits the use of arbitration clauses in mortgage contracts. And it gives the Bureau the power to issue regulations on the use of arbitration clauses in other consumer finance markets if the Bureau finds that doing so is in the public interest and for the protection of consumers, and if findings in such a rule are consistent with the results of the Bureau’s study