Caffeinated Absurdity: Fact Checking the Chamber’s New Ad Attacking the CFPB’s Forced Arbitration Rule

Rhetoric v. Reality

The U.S. Chamber of Commerce has launched a new ad attacking the Consumer Financial Protection Bureau’s (CFPB) new rule cracking down on forced arbitration clauses in contracts with financial institutions like big banks and credit cards. The rule, finalized just this month, prohibits banks from taking advantage of consumers by denying them their constitutional right to have their day in court and instead forcing them to bring any grievances to secret arbitration tribunals where big banks and financial interests call the shots. The following is a fact check of the Chamber’s new ad, “Coffee.”


Rhetoric: The U.S. Chamber of Commerce ad claims the CFPB’s newly-released rule “takes away arbitration and replaces it with more lawsuits.”

  • In their ad, the U.S. Chamber of Commerce claimed, “government bureaucrats are pushing a rule that takes away arbitration and replaces it with more lawsuits.” [“Coffee,” U.S. Chamber of Commerce, 08/24/17]

Reality: The rule does not ban the use of arbitration clauses. The Dodd-Frank Act specifically ensured the CFPB cannot “prohibit or restrict a consumer from entering into a voluntary arbitration agreement.” Instead, the CFPB safeguarded consumers by banning “banks and other financial companies” from forcing consumers into arbitration and restricting their ability to band together to have their day in court.

  • According to the Dodd-Frank Act, “The Bureau [(CFPB)] shall conduct a study of, and shall provide a report to Congress concerning, the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services. […] The Bureau, by regulation, may prohibit or impose conditions or limitations on the use of an agreement between a covered person and a consumer for a consumer financial product or service providing for arbitration of any future dispute between the parties, if the Bureau finds that such a prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers. The findings in such rule shall be consistent with the study conducted […] The authority described […] may not be construed to prohibit or restrict a consumer from entering into a voluntary arbitration agreement with a covered person after a dispute has arisen.” [Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010), section 1028(a), accessed 08/16/17]
  • “Roughly 240 days from now, banks and other financial companies will no longer be allowed to prohibit customers from banding together in class-action lawsuits through the use of binding arbitration clauses, as the Consumer Financial Protection Bureau today released a long-awaited finalized rule on arbitration. The 775-page rule [PDF] doesn’t ban the use of forced arbitration clauses outright, but it dictates when financial institutions, lenders, and others can use the provisions and creates specific language to be included in consumer contracts.” [Ashlee Kieler, “CFPB’s Finalized Arbitration Rule Takes Away Banks’ ‘Get Out Of Jail Free Card’,” Consumerist, 07/11/17]

Rhetoric: The U.S. Chamber of Commerce ad claims “government bureaucrats” were pushing the arbitration rule.

  • In their ad, the U.S. Chamber of Commerce claimed “government bureaucrats are pushing a rule that takes away arbitration and replaces it with more lawsuits.” [“Coffee,” U.S. Chamber of Commerce, 08/24/17]

Reality: It was Congress that mandated the CFPB work on arbitration. As required by the Dodd-Frank Wall Street Reform Act, the Bureau spent more than five years studying arbitration clauses, and only announced a rule after receiving more than 100,000 public comments from industry, consumer advocates and every day Americans.The Bureau was required by the Dodd-Frank Wall Street Reform Act to study arbitration, and only issued a rule on the issue after five years of various public input, studies, and hearings.

  • The Bureau was required by the Dodd-Frank Wall Street Reform Act to study arbitration, and only issued a rule on the issue after five years of various public input, studies, and hearings.As part of the Dodd-Frank Wall Street Reform Act, the Consumer Financial Protection Bureau was required to “conduct a study of… the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services.” [“12 U.S. Code § 5518 – Authority to restrict mandatory pre-dispute arbitration,” Cornell Law School Legal Information Institute, accessed 08/01/17]
  • The Consumer Financial Protection Bureau first began working on the issue of arbitration clauses in April of 2012. They held multiple field hearings, conducted the Dodd-Frank mandated “arbitration study,” convened a small business review panel and held a tribal consultation in advance of the rule. The Rule was finally announced on July 10, 2017, after a lengthy public comment period, where the bureau received over 100,000 public comments. [“New protections against mandatory arbitration,” Consumer Financial Protection Bureau, accessed 08/01/17, “Arbitration Agreements,” Regulations.gov, accessed 08/01/17 and Courtney-Rose Dantus, “We’ve issued a new rule on arbitration to help groups of people take companies to court, Consumer Financial Protection Bureau, 07/10/17]

Rhetoric: The U.S. Chamber of Commerce called the CFPB a “rogue government agency.”

  • In their ad, the U.S. Chamber of Commerce called the Consumer Financial Protection Bureau a “rogue government agency.” [“Coffee,” U.S. Chamber of Commerce, 08/24/17]

Reality: The CFPB is not “rogue.” Politifact has examined previous misleading claims like this one, and noted that there are actually a number of ways the bureau can be held accountable. Congress has considerable oversight of the CFPB, including the following checks and balances: the Senate must confirm the director of the bureau, the director is required to testify twice a year before several Senate and House committees, the bureau must submit semi-annual financial justifications for its budget, which is also “subject to an annual financial audit” by the Government Accountability Office, and Congress can always “use legislation to change (or even abolish) the bureau.”

  • Politifact has rated this misleading claim only “half true” and notes that there “are a number of ways in which Congress can oversee the bureau,” and noted Congress has the following powers over the CFPB:
  • “Congress can use legislation to change (or even abolish) the bureau. Indeed, there’s currently legislation in both chambers to enshrine a variety of transparency standards, some of which passed the House Financial Services Committee with bipartisan backing.”
    • “The Senate must confirm the head of the bureau.”
    • “The board’s director must testify at least twice a year before the Senate Banking, Housing, and Urban Affairs Committee; the House Financial Services Committee; and the House Energy and Commerce Committee. The bureau must also submit semi-annual budget justifications.”
    • “The bureau is subject to an annual financial audit by the Government Accountability Office, a congressional agency.” [Louis Jacobson, “Carly Fiorina says Consumer Financial Protection Bureau has ‘no congressional oversight,'” Politifact, 11/14/15]

Rhetoric: Trial lawyers sued McDonalds because the “coffee’s too hot.”

  • In their ad, the U.S. Chamber of Commerce said trial lawyers sued McDonalds because the “coffee’s too hot.” [“Coffee,” U.S. Chamber of Commerce, 08/24/17]

Reality: Despite popular belief, after receiving “third-degree burns that required skin-graft surgeries” due to McDonald’s coffee spilled in her lap, Stella Liebeck “did not sue right away and initially asked McDonald’s only for the several thousand dollars to cover her medical expenses. The company refused.” It was only after going to court that she was awarded damages that equaled just two days-worth of McDonald’s coffee sales. These damages were ultimately reduced by a judge while the case was settled out of court.

  • In 1994, Stella Liebeck won a case against McDonald’s for after suffering “third-degree burns that required skin-graft surgeries” after being burned by hot coffee spilled into her lap. [Stuart Pfeifer, “McDonald’s sued over coffee burns,” Los Angeles Times, 01/10/94]
  • “Many believe she was driving the car and juggling a cup of coffee — classic recklessness. In fact Ms. Liebeck’s nephew was at the wheel and was not going through the drive-through window. He had pulled into a space in the McDonald’s parking lot so that she could add cream and sugar to her coffee. She has been portrayed as a greedy plaintiff out for a bonanza, but she did not sue right away and initially asked McDonald’s only for the several thousand dollars to cover her medical expenses. The company refused.
  • And while jurors found that Mrs. Liebeck was 20 percent responsible for the accident, they were outraged by what they saw as the company’s arrogance and decided to punish McDonald’s by levying punitive damages amounting to two days’ worth of coffee sales. And those making jokes tend to skip the part of the story in which the judge reduced the award and the case was settled out of court.” [John Schwartz, “Documentary Gives Hot Issue Caffeinated Jolt,” The New York Times, 06/26/11]

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