CFPB Director Richard Cordray speaking at the U.S. Chamber of Commerce's 11th Annual Capital Markets Summit: Financing American Business, in Washington, D.C. March 30, 2017.
When the Consumer Financial Protection Bureau expanded its public database to include narratives of negative customer experiences, banks such as Wells Fargo and other industry players worried about being named and shamed.
Now, a new public database could be going up online as part of the agency's newly finalized arbitration rule if the regulation survives anticipated challenges on Capitol Hill and in the courts.
The CFPB's new rule, which calls for restricting arbitration agreements that block consumers from filing class actions, immediately drew criticism from the financial industry. The U.S. Chamber of Commerce has argued the rule would effectively shut down a cheaper and faster form of dispute resolution for consumers, as companies would no longer subsidize arbitration if they were still faced with the cost of defending against class actions.
Perhaps because of that dim view of the future of arbitration, another portion of the CFPB rule has drawn less attention: A requirement that companies give the agency records about individual arbitrations including any awards that would still be allowed under the new regulation. The CFPB plans to publish those records, with appropriate redactions, on its website, according to the 775-page final rule published Monday.
CFPB Director Richard Cordray said the publication of the records will promote transparency and give consumers, providers and other regulators more insight into how arbitration works. Cordray said financial services providers will scrub the records of personal information and the CFPB would begin posting them online beginning in July 2019 a full 12 months after his five-year term is set to expire.
Federal agency databases have come under threat in the Trump administration, and the CFPB's proposal would meet similar resistance.
The U.S. Labor Department's Occupational Safety and Health Administration this year suspendedan Obama-era rule that required companies to electronically report their injury and illness records so that they could be made available to the public. The U.S. Treasury Department under Secretary Steven Mnuchin has called for shutting down public access to the CFPB's consumer complaint database, arguing it lacks appropriate safeguards. Instead, the agency suggested the database be made available only to state and federal agencies.
In the rule that the CFPB published Monday, the agency noted several industry commenters that said the publication of arbitration records would lead plaintiff's attorneys to bring more frivolous litigation generally. The Kansas-based Heartland Credit Union Association argued the publication of collected arbitration records would serve the litigators in formulating more class actions settlements.