One U.S. House Financial Services Committee member who possesses four decades of experience in the automotive space this week tried to pin down an outspoken advocate of the Consumer Financial Protection Bureau’s proposal that would prohibit mandatory arbitration clauses, alluding to the potential that modified policies might do more for plaintiff lawyers than consumers’ possible financial reward.

Paul Bland Jr. is executive director of Public Justice, which according to its website “pursues high impact lawsuits to combat social and economic injustice, protect the Earth’s sustainability and challenge predatory corporate conduct and government abuses.” Bland also appeared during the CFPB’s field hearing in Albuquerque, N.M., on the day the bureau released its proposal earlier this month. Bland again championed the proposal when the House’s Subcommittee on Financial Institutions and Consumer Credit conducted a hearing titled, “Examining the CFPB’s Proposed Rulemaking on Arbitration: Is it in the Public Interest and for the Protection of Consumers?”

Throughout the hearing, Bland reiterated much of what he stated during the CFPB’s event, indicating that arbitration that entities such as auto finance companies and dealerships have used for years is not good for consumers.

“The Consumer Financial Protection Bureau’s proposed rulemaking on arbitration is unquestionably in the public interest and will serve to protect consumers,” Bland said in his prepared testimony. “Specifically, it will protect consumers from the use of forced arbitration clauses that ban them from filing or participating in class actions, a widespread practice that large banks, payday lenders and various sorts of predatory lenders have used to exempt themselves from most private enforcement of America’s consumer protection laws.

“Exempting the financial industry from the normal legal system has had far reaching — and disastrous — consequences,” he continued. “Predatory lending and dishonest lending practices have pushed millions of people right into desperation. Far too many Americans have been tricked into taking out loans that were far more expensive than they realized.”

More than an hour into the hearing that teeter-tottered between industry representatives from the Consumer Bankers Association and the U.S. Chamber of Commerce defending arbitration benefits and Bland maintaining the consumer advocate view, Rep. Roger Williams took his turn to speak. Williams, a Texas Republican who has been a House lawmaker since 2012 and is chairman of Roger Williams Chrysler Dodge Jeep Ram in Weatherford, immediately aimed his questions at Bland.

“Mr. Bland,” Williams began, “I’m one of your favorite people. I’m a car dealer; have been for 44 years. I can tell you that arbitration works a lot better than lawsuits.”

Williams and Bland then traded figures about how the class actions examined by the CFPB delivered benefits to 13 million Americans. Bland contended that attorneys gained about 15 percent of the settlements for their fees. Williams asserted it could have been closer to 30 percent of the $425 million noted in the bureau’s study.

Williams then asked, “In other words, when does a lawsuit to you become worth your while?”

Bland responded, “I do a ton of work on a pro bono basis. Probably 80 percent of the work my firm does has no expectation of receiving a fee whatsoever.”

Then Williams turned to another witness who participated in Wednesday’s hearing, Andrew Pincus, a partner at Mayer Brown who spoke on behalf of the U.S. Chamber of Commerce.

“A couple of points: I think when you’re looking at class actions, it’s important to look at the costs and the benefits,” Pincus said. “And it’s important not to assume, as some of this discussion has, that every class action that’s filed is meritorious. If every class action that’s filed were meritorious, we probably wouldn’t have a problem. But the problem is we know from the studies that 87 percent of them didn’t provide any benefit to the class. The other 13 percent were settled so we don’t know if they were just settled for litigation value and maybe they, too, could have been fought if the company wanted to spend a lot of money in legal fees.

“We really don’t know if the class action system is vindicating rights that have been wronged as opposed to being a system that’s been very good for lawyers who bring cases and, to be frank, very good for the lawyers who defend them. But that doesn’t really so much for people except for transferring money around. I think that’s the major problem,” Pincus continued.

Earlier in the hearing, Rep. Blaine Luetkemeyer, a Missouri Republican who has questioned the CFPB’s motives in the past, asked Jason Johnston to attempt to quantify the amount of risk finance companies might face in association with class-action lawsuits. Johnston is a Henry L. and Grace Doherty Charitable Foundation Professor of Law at the University of Virginia School of Law and emphasized at the start of Wednesday’s session that he was not representing any organization.

“Certainly there is risk in large class actions,” Johnston said. “Under the Telephone Consumer Protection Act, for example, some of the largest financial institutions in the country such as Capital One and Chase have entered into very, very large class action settlements; many, many millions of dollars.

“When you add those up across the country and over time, again these are very large financial institutions, so we’re not talking about a magnitude of size that’s destabilizing, but it’s got to fit into the risk profile somehow,” he added.

Dong Hong, CBA’s vice president and regulatory counsel, quickly followed Johnston’s assertions.

“One of the things I fear is if the proposal goes final in the way it looks like today, there’s a potential dramatic increase in potential class action lawsuit exposure,” Hong said. “If you take a look at some of the prudential regulatory guidance, one of the things they ask financial institutions to do is maintain controls and mitigate litigation exposure risk. If they see an increase in that type of risk, then institutions will have to have conversations with their respective regulator to figure out if they have to lock away more capital to prepare for that risk.”

During his prepared testimony, Hong offered six suggestions on how the CFPB should re-examine and supplement its arbitration study:

• Conduct a comparison between litigation and arbitration on the basis of accessibility, cost, fairness and efficiency

• Ascertain if consumers would benefit from becoming more informed about arbitration

• Survey consumers who have experience with litigation, class actions, and arbitration about their level of satisfaction with these dispute resolution processes

• Examine the net benefit of class actions to consumers in light of the supervisory or enforcement authorities of state and federal regulatory and enforcement agencies

• Determine if prohibiting or restricting the availability of mandatory pre-dispute arbitration provisions would effectively eliminate arbitration as an alternative dispute resolution process for the majority of consumers

• Inspect whether prohibiting or restricting the availability of mandatory pre-dispute arbitration provisions would impact the cost and availability of credit to consumers and small businesses.

“Strong and effective consumer protection and fair and responsible banking are profoundly important to our member banks,” Hong said. “CBA routinely engages with the CFPB and other regulators to promote reasonable and effective regulation that ensures consumers have the ability to choose safe and affordable products and services.

“It is our concern the CFPB’s proposal will result in increased costs of financial services and products and inhibit the ability of financial institutions to innovate and better serve their customers. In short, consumers stand to lose from the CFPB’s proposal purportedly meant to provide greater relief,” he continued.

When Williams came to the end of his allotted five minutes during the hearing, he added, “The bottom line … it’s bad for business. It’s bad for the consumer. And it’s bad for Main Street America.”

The entire hearing can be watched via the window at the top of this page.