U.S. Consumer Financial Protection Bureau (CFPB) Director Richard Cordray says that many consumers hold credit, debit, or prepaid cards that are subject to pre-dispute arbitration clauses. He notes, "The terms are not subject to negotiation. Like the other terms of most consumer financial products, they are essentially 'take it or leave it' propositions."
Many businesses prefer arbitration because settlements are often limited and because professional arbitrators tend to side with businesses. Federal regulators are examining these restrictive contract provisions, which often bar consumers from suing companies individually or as part of a class action lawsuit. The U.S. Supreme Court ruled in 2011 that businesses could include arbitration contracts in their service contracts, which companies say are an effective way to address small claims. However, the Dodd-Frank law enables the CFPB to examine those contracts and to "prohibit or impose conditions or limitations on the use" of those clauses.
Preliminary investigations found that only 900 consumers used arbitration between 2010 and 2012, and "there are almost no disputes over amounts less than $1,000," Cordray says. Although consumers could receive some relief from these clauses, workers are unlikely to achieve the same as a federal appeals court overturned a National Labor Relations Board decision that had barred employers from requiring arbitration agreements that prohibit class-action suits or collective claims over pay and hours.