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Cordray’s Letter to President Trump Distorts Impact of Arbitration Rule

CFPB Director Richard Cordray yesterday sent a letter to President Trump asking him to uphold the Bureau’s arbitration rule even though the Senate recently joined the House in authorizing a repeal of the rule under the Congressional Review Act.

Director Cordray’s letter states that without the arbitration rule, military service members will “get cheated out of their hard-earned money and be left helpless to fight back.”   That is not the case, and he knows it.  First, as discussed in the arbitration rule and as we have previously clarified, the Military Lending Act already regulates the use of arbitration agreements in most consumer credit contracts entered into by active-duty servicemembers and their dependents.  Therefore, it will not be affected by repeal of the CFPB rule.

Second, further contradicting his letter, Director Cordray acknowledged in the arbitration rule that arbitration is no more harmful to military service members than litigation: “Neither the [CFPB’s consumer arbitration] Study nor the commenters offered evidence demonstrating that individual arbitrations involving servicemembers and their families are inferior to individual litigation in terms of remedying consumer harm or unique from arbitration involving non-servicemembers.”

Director Cordray’s letter to the President omitted both of these important points.  The letter should be disregarded by the President as he prepares to sign H.J.Res.111 into law.

Copyright © by Ballard Spahr LLP

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About this Author

Kaplinksy, partner, New York, finance
Partner

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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215-864-8544
Mark Levin, Ballard Spahr Law Firm, Litigation Attorney
Partner

Mark J. Levin is known for his work in complex commercial, insurance, and class-action litigation, with particular experience in consumer finance litigation, the structuring and enforcement of consumer arbitration clauses, and the defense of insurance companies in class actions. He testified in 2007 for the lending industry before a subcommittee of the U.S. House Judiciary Committee at an oversight hearing on whether mandatory arbitration in consumer contracts is fair to consumers.

Mr. Levin has represented banks in defending against the first private class-action lawsuits under the Federal Trust Indenture Act, nuclear power plant owners in a year-long arbitration against an international insurance consortium, and school districts in a major funding lawsuit to recover state funds. He is currently involved in defending banks, other lending companies, and insurance companies in a wide variety of consumer class actions, including numerous class actions brought under the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

215-864-8235