The Consumer Financial Protection Bureau's Arbitration Study: A Summary and Critique

59 Pages Posted: 26 Aug 2015 Last revised: 19 Sep 2015

Jason Scott Johnston

University of Virginia - School of Law; PERC - Property and Environment Research Center

Todd J. Zywicki

George Mason University - Antonin Scalia Law School, Faculty; PERC - Property and Environment Research Center

Date Written: August 25, 2015

Abstract

The Consumer Financial Protection Bureau’s Arbitration Study: Report to Congress 2015 does not support the case for ex ante regulation of mandatory consumer arbitration clauses. It contains no data on the typical arbitration outcome - a settlement - and it is these arbitral settlements, and not arbitral awards, that should be compared to class action settlements. It does not address the public policy question of whether, by resolving disputes more accurately on the merits, arbitration may prevent class action settlements induced solely by defendants’ incentive to avoid massive discovery costs. It shows that in arbitration consumers often get settlements or awards, are typically represented by counsel, and achieve good results even when they are unrepresented. In class action settlements, the Consumer Financial Protection Bureau reports surprisingly high payout rates to class members and low attorneys’ fees relative to total class payout. These aggregated average numbers reflect the results in a very small number of massive class action settlements. Many class action settlements have much lower payout rates and higher attorneys’ fees.

Keywords: consumer financial regulation, arbitration, class action litigation, attorneys’ fees

JEL Classification: K2, G2, K23, K41

Suggested Citation

Johnston, Jason Scott and Zywicki, Todd J., The Consumer Financial Protection Bureau's Arbitration Study: A Summary and Critique (August 25, 2015). Mercatus Working Paper; George Mason Legal Studies Research Paper No. LS 15-07; George Mason Law & Economics Research Paper No. 15-25; Virginia Law and Economics Research Paper No. 24; Virginia Public Law and Legal Theory Research Paper No. 51. Available at SSRN: https://ssrn.com/abstract=2650846 or http://dx.doi.org/10.2139/ssrn.2650846

Jason Scott Johnston

University of Virginia - School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

Todd J. Zywicki (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8091 (Phone)
703-993-8088 (Fax)

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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