Arbitration clauses are a standard part of many contracts consumers sign with their banks, credit card, and other financial services companies. These clauses commonly are worded in such a way to prevent consumers from joining together to protect their legal rights, a practice that the Consumer Financial Protection Bureau (CFPB) would like to see changed.

The CFPB recently completed a three-year study of arbitration clauses, issuing a proposal that would ensure consumers can band together to protect their legal rights if necessary while still maintaining arbitration clauses. The agency also would like access to arbitration files, and would like to see those cases made public.

“The overwhelming majority of disputes are resolved informally,” said Alan Kaplinsky, a lawyer at Ballard Spahr who helped financial service firms draft and institute binding arbitration clauses. If not, he said, arbitration remains a faster and more affordable way to resolve disputes rather than opening a case in the court system.

More than half a million consumer complaints have been resolved through the CFPB, Mr. Kaplinsky said, and educating consumers on the process should also be a focus.

“Tell consumers how to use their arbitration provisions,” he recommended to Richard Cordray, CFPB director, and others.

Related Practice

Consumer Financial Services
Consumer Financial Protection Bureau
Bank Regulation & Supervision