Coalition letter on arbitration hearing in financial services products

Dear President Brown and Toomey Ranking Member:

The undersigned organizations appreciate the opportunity to provide input to the Banking, Housing and Urban Affairs Committee prior to the March 8 hearing titled “Review of Mandatory Arbitration in Financial Services Products”. Arbitration is a fair, effective and less expensive way to resolve disputes than going to court. It should be preserved for all consumers, including those who use financial services products.

Several empirical studies demonstrate that claimants in arbitration do as well, or in many circumstances considerably better, than in court. For example, recent studies have shown that consumers prevail more often, get more money back, and resolve their claims faster in arbitration than in litigation.[1] Studies have also shown that class action settlements often provide only a pittance — or often, nothing at all — to class members while millions of dollars are paid out to their attorneys.[2]

Arbitration proceedings are easier to navigate than court proceedings, allowing consumers to pursue their claims without the expense of hiring an attorney. Arbitration also has many fairness and due process protections built into the system, and the courts provide another level of oversight. If an arbitration agreement is unfair, the courts can intervene and must declare these arbitration agreements inadmissible and unenforceable.

Arbitration also allows consumers to obtain a remedy for cases that are not eligible to be resolved by class action or involve amounts too small to attract an attorney to take on an individual case. Arbitration is the only realistic way to obtain redress for such claims.

Thank you for considering our views.

Truly,

American Bankers Association

American Financial Services Association

American Securities Association

Banking Policy Institute

Consumer Bankers Association

Consumer Data Industry Association

National Association of Credit Unions

Electronic Transactions Association

Independent Community Bankers of America

National Association of Federal Credit Unions

Securities and Capital Markets Industry Association

United States Chamber of Commerce

cc: Members of the Senate Banking, Housing and Urban Affairs Committee

[1]​ To see Fairer, Faster, Better II: An Empirical Assessment of Consumer Arbitration (November 2020) available at https://instituteforlegalreform.com/research/fairer-faster-better-ii-an-empirical-assessment-of- consumer-arbitration/; and Claimant Win Rates in Consumer and Employment Arbitration (November 2021) at https://instituteforlegalreform.com/claimant-win-rates-in-consumer-and-employment-arbitration-november-2021- update/.

[2]​ To see Consumer Financial Protection Bureau, Arbitration Study: Report to Congress (March 2015) available at https://files.consumerfinance.gov/f/201503_cfpb_arbitration-study-report-to-congress-2015.pdf.