In a Tuesday letter to the CFPB, the American Bankers Association and two other trade groups said the watchdog should not move forward with a proposed phone survey on credit card dispute resolution.
The ABA, along with The Financial Services Roundtable and Consumer Bankers Association, said the survey would be inconsistent with the CFPB’s statutory mandate, adding that the survey’s design is flawed.
“Instead, we urge the Bureau to conduct rigorous and sound peer-reviewed research comparing the various methods of consumer dispute resolution, notably, litigation and arbitration, and thus satisfy the Congressional mandate articulated in Section 1028 of the Consumer Financial Protection Act,” the groups said in the letter.
The CFPA provision mandates that the CFPB conduct a study on the use of arbitration agreements between covered entities and consumers in connection with financial products or services and provide Congress with the study’s results.
“The Bureau’s proposed survey does not satisfy these standards,” the groups said. “The proposed lengthy and complex telephone questions will not produce information that is meaningful in determining whether regulation of the use of mandatory arbitration would be ‘in the public interest and for the protection of consumers.’ Questions that explore consumers’ limited and uninformed assessments, and preferences of dispute resolution options offer little if anything in evaluating how arbitration actually functions and, thus, lack practical utility.”
The groups said the CFPB should examine the costs and benefits of individual arbitration to consumers, businesses and society, adding that the study is “critical for advancing the Bureau’s objective in fulfilling its mandate under the CFPA.”
Additionally, section 1028 of the CFPA requires any rulemaking to be based on a finding that limiting or restricting arbitration would benefit the public and would be in the interest of consumer protection. The groups said, however, that it is “unlikely” that random selection of consumers will produce adequate information to assess or compare arbitration versus litigation.
The groups also pointed to the survey method, saying the design as proposed is flawed.
“First, the experience of respondents with credit card disputes and the resolution of those disputes through mandatory arbitration or judicial process is demonstrably inadequate under the proposed methodology to yield informed consumer response,” the letter said. “Second, the survey does not account for the availability in ‘choice architecture’… that could influence a consumer’s election of pre-dispute arbitration. Therefore, the resulting data on consumer preference will be unreliable in the real world situations to which policy must apply.”
The groups said the survey has the “real potential” to result in arbitration policy based on “inaccurate data and conclusions.”