Arbitration’s lack of legal precedent

The Consumer Financial Protection BureauAn independent federal agency created by the Dodd-Frank Act responsible for regulating consumer protection with regards to financial services and products. (CFPB) is seeking information regarding forced arbitration clauses found in contracts for consumer financial products. By understanding how arbitration affects consumers, CFPB will decide whether rules are necessary to govern arbitration requirements in financial agreements.

Mandatory arbitration provisions require disputes be resolved in private hearings instead of a public courtroom, and have become prevalent in many consumer contracts. Arbitration clauses are mandated by corporations covering credit cards, bank accounts, gift cards and loans from payday lenders.

Last year, the Safe Checking in the Electronic Age project found that of 250 bank accounts at ten large banks, the majority contained forced arbitration requirements. Some clauses included language requiring the customer to cover the banks’ costs and expenses, even if the customer wins the arbitration.