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From Banking and Finance Law Daily, April 30, 2015

CFPB pressed to assess effects of possible arbitration ban on small businesses

By John M. Pachkowski, J.D.

The American Bankers Association, American Financial Services Association, Consumer Data Industry Association, National Small Business Association, and U.S. Chamber of Commerce have called on the Consumer Financial Protection Bureau to convene a small business panel, as required by the Small Business Regulatory Enforcement Fairness Act (SBREFA), before the bureau proposes any regulations governing the use of arbitration agreements in consumer financial products.

In March 2015, the CFPB released a report that found arbitration clauses restrict consumers’ relief for disputes with financial service providers by limiting class actions. In a press release, the bureau’s director, Richard Cordray stated, “Now that our study has been completed, we will consider what next steps are appropriate” (see Banking and Finance Law Daily, March 11, 2015).

The trade groups seized upon that statement as the basis of their request that the CFPB convene the small business panel “as soon as possible, so that the concerns of small businesses will be heard as you and your colleagues are in the process of assessing the potential impact of various policy decisions.”

To bolster their claim for a small business panel, the trade groups claimed that any proposed regulation “could have a significant economic impact on a substantial number of small entities.” Specifically, they pointed out that:

  • a regulation could “eliminate the availability of arbitration for resolving disputes between small entities and their credit providers” because “small businesses frequently use consumer credit to finance their operations”; and

  • the SBREFA requires the bureau to seek information regarding the impact on cost and availability of credit on small entities that would result from banning or regulating pre-dispute arbitration agreements.

Companies: American Bankers Association; American Financial Services Association; Consumer Data Industry Association; National Small Business Association; U.S. Chamber of Commerce

MainStory: TopStory CFPB ConsumerCredit CreditDebitGiftCards

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