A new report by the Consumer Financial Protection Bureau (CFPB) on the use of arbitration agreements in consumer financial products found that about nine out of 10 clauses allow banks to bar consumers from participating in class actions.
Although tens of millions of Americans are subject to arbitration clauses in their credit card, checking account, payday loan, and prepaid card contracts, an average of only about 300 disputes in these markets were filed each year with the American Arbitration Association between 2010 and 2012. In the same time period, consumers filed more than 3,000 federal court cases about credit card issues alone -- more than 400 of which received class action status.
Since July 2009, more than 13 million class members made claims or received payments that involved credit cards, deposit accounts, or payday loans; and 3,605 individuals opted out. “At most, only a handful of these individuals who opted out chose instead to file an arbitration claim,” said CFPB director Richard Cordray. “One significant takeaway from these various points is that few consumers use arbitration at all, at least when compared to the number of consumers involved in lawsuits and class actions.”
The study also found that consumers find arbitration clauses confusing. The CFPB, under the Dodd-Frank Act, was charged with studying arbitration agreements in consumer financial products. When the research is complete, the agency may adopt new regulations that prohibit limitations to arbitration agreements if such measures are found to be in consumers' best interests.