September 12, 2017

Responses from Bank CEOs Demonstrate Positive Impact of CFPB Arbitration Rule, Undermine Industry Case for Reversal

Text of Senator Warren's Letters (PDF)
Text of Responses from All 16 CEOs (PDF)

Washington, DC - United States Senator Elizabeth Warren (D-Mass.) today released responses from the CEOs of sixteen of the largest consumer banks in the country, following a request she sent last month asking for information about their bank's use of forced arbitration clauses and their position on the Consumer Financial Protection Bureau's (CFPB) recently issued arbitration rule.    

"Despite the claims of their paid lobbyists, not a single one of the sixteen CEOs I wrote was willing to defend efforts to gut the CFPB's pro-consumer arbitration rule," said Senator Warren.  "As the Wells Fargo fake accounts scandal and the recent Equifax data breach show, consumers need more legal tools to hold financial firms accountable, and that's exactly what the CFPB rule gives them." 

Collectively, the responses highlight the positive impact of the CFPB's arbitration rule and the industry's weak and misleading case for reversing the rule using the Congressional Review Act.

  • The responses confirm that millions of consumers will gain the right to hold their bank accountable in court because of the CFPB rule: Fifteen banks (Citigroup, U.S. Bancorp, Ally Financial, T.D. Bank, Bank of America, J.P. Morgan Chase, American Express, Suntrust, Wells Fargo, Barclays US, Citizen's Financial Group, PNC Financial Services Group, HSBC North America, BB&T and Charles Schwab) include mandatory arbitration clauses in at least some of their customer contracts. Of these fifteen, eleven (Citigroup, U.S. Bancorp, J.P. Morgan Chase, American Express, Suntrust, Wells Fargo, Barclays U.S., Citizen's Financial Group, PNC Financial Services, BB&T, and Charles Schwab) use arbitration clauses extensively in the contracts for the products they offer consumers. As a result, the CFPB rule will allow millions of these banks' customers to better hold the banks accountable for misconduct. 
  • Despite their lobbyists' claims that the CFPB rule is bad for consumers, not a single bank CEO would go on record in support of reversing the rule: In fact, only one institution (American Express) stated explicitly that it supported reversing the rule, and it did so in a response from an executive in the Government Affairs department. Bank CEOs are not shy about speaking out about changes they truly believe will hurt their bank or their customers - their silence here is telling. 
  • Despite claims in several responses that forced arbitration is good for consumers, not a single bank would back up that claim by providing anonymized arbitration data to show how their own customers fared in arbitration: Eleven banks (Citigroup, U.S. Bancorp, Ally Financial, J.P. Morgan Chase, American Express, Suntrust, Wells Fargo, Barclays US, Citizen's Financial Group, PNC Financial Services Group, and BB&T) claimed forced arbitration is a better alternative for their customers than class action lawsuits. None of the banks supported their assertion by complying with Senator Warren's request to disclose how their own customers have fared in arbitration against them.
  • Instead of providing data about their use of arbitration, several banks distorted the findings of the CFPB Arbitration Study: Several banks used a selective and misleading analysis of data to back up their claims that forced arbitration clauses are good for their customers. In their responses, many of the banks asserted that consumers recover more money from arbitration awards than from class action lawsuits (Citigroup, U.S. Bancorp, Ally, J.P Morgan Chase, Barclays U.S., Citizen's Financial Corp., and BB&T). In making this comparison, the banks misleadingly compared the size of the average class action award with the size of the average individual consumer arbitration award, while they omitted the 91% of cases in which consumers collected nothing in an arbitration case.
    • The Economic Policy Institute has found that consumers were paid monetary awards in only 9 percent of the disputes that arbitrators resolved. Companies can also make claims against consumers before an arbitrator and, when they do, they win 93 percent of the time. Looking at the outcomes of all arbitrations, on average, companies recover $7,725 from the consumer. Even when the consumer prevails, the average award is only 12 cents for every dollar they claimed, according the CFPB's Arbitration Study. And consumers rarely pursue individual arbitration. Of the tens of millions of consumers covered by mandatory arbitration agreements, consumers filed an average of only 616 arbitration cases a year. In contrast, over the five-year period studied by the CFPB, 34 million consumers were eligible to receive more than $1 billion in cash payments from class actions.
  • Despite lobbyist claims that the CFPB rule would hurt the banking industry, not one bank that rarely uses forced arbitration clauses indicated that it has suffered financially as a result: Five banks (Capital One, Bank of America, Ally Financial, T.D. Bank, and HSBC North America) stated that they very rarely use forced arbitration clauses in any customer contracts.  None of these banks claimed that they had suffered financially because of that decision.  In fact, in its response, Bank of America stated that its decision to remove arbitration clauses from nearly all consumer product and service contracts in 2009 has "not materially impacted" their "mission to provide suitable financial products and services..."