CFPB’s Arbitration Rule Would Harm Consumers, Says NBPCA

August 22, 2016

WASHINGTON (August 22, 2016) – Today, the Network Branded Prepaid Card Association (NBPCA) submitted comments expressing significant concerns with the Consumer Financial Protection Bureau’s (CFPB) proposed rule on pre-dispute mandatory arbitration agreements. In the comment letter, NBPCA outlines the potential harms eliminating arbitration could have on both consumers and service providers, questions the CFPB’s authority to move forward with the rule without further study, and urges the CFPB to withdraw the proposed rule.

"We have serious concerns that the likely impact of the Proposed Rule will actually harm consumers by depriving them of what has proven to be a broadly applicable, effective, inexpensive, and convenient method of resolving disputes, in favor of a more expensive, less convenient alternative not available to all consumers for all claims," wrote the NBPCA.

The letter also details areas of concern regarding the CFPB’s authority to issue this proposed rule. The letter explains:

  • The CFPB failed to demonstrate how this regulation is necessary for the protection of consumers and therefore exceeded its statutory authority in issuing the proposed rule.
  • The CFPB’s study wrongly focused on class-action lawsuits, not the arbitration process, and subsequently does not provide sufficient cost/benefit analysis to justify this rulemaking.
  • The findings of the CFPB study do not actually support the limitations and prohibitions the proposed rule seeks to impose.

Further, NBPCA urges the CFPB to re-evaluate the rule’s one-size-fits-all approach which fails to take into account the varied types of financial products covered by the proposed rule and how consumers use them. Ultimately, the proposed rule risks driving smaller providers out of business because they are less equipped to bear the significant costs of defending class-action lawsuits, or simply the threat of a class-action lawsuit. The remaining providers will likely limit the features and functionality on the products they make available in the marketplace. Thus, the impact of the CFPB’s proposal will be to stymy innovation and development in this area, ultimately limiting product choice and variety and thereby harming consumers.

At a minimum, the NBPCA suggests creating a carve out for smaller providers and certain other providers that meet a number of factors including a track record of responding to consumer complaints in a timely and effective manner.

The letter can be viewed here: 

Comment Letter on Pre-Dispute Arbitration Agreements


About the NBPCA

The Network Branded Prepaid Card Association (NBPCA) is a non-profit, inter-industry trade association that supports the growth and success of network branded prepaid cards and represents the common interests of the many players in this rapidly growing payments category. For additional information, visit, or follow us on Twitter@NBPCA.