Legal, Regulatory, and Privacy Issues

Federal watchdog gives consumers a chance to speak on arbitration


The Consumer Financial Protection Bureau is giving consumers and banking industry representatives a chance to speak their minds about the long-disputed matter of arbitration

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

The Consumer Financial Protection Bureau is giving consumers and banking industry representatives a chance to speak their minds about the long-disputed matter of binding arbitration clauses in financial agreements.

Arbitration clauses, which require parties to settle all disputes out of court, are widely used in credit card agreements and other financial products. According to the invitation for public comment posted Tuesday, April 24, Congress requires the CFPB, established in 2011 as a federal consumer watchdog, to examine how arbitration is affecting consumers. The agency also has the power to establish regulations to protect consumers.

“Arbitration clauses are found in many contracts for consumer financial products,” said CFPB Director Richard Cordray. “We want to learn how arbitration clauses affect consumers, and how effective arbitration is in resolving consumers’ issues. This inquiry will help the Bureau assess whether rules are needed to protect consumers.”

Many financial companies argue that arbitration is a faster, more forthright alternative to settling problems in the court system. They also note that it’s cheaper. Arbitration, however, requires consumers to surrender their right to sue, and many consumer advocates say the process as used in financial products is biased toward banks.

Some card issuers dropped the take-it-or-leave-it arbitration clauses in 2009 under public pressure, but they made a comeback with a January 2012 decision by the U.S. Supreme Court, which backed their legality.

Against that backdrop, the CFPB wants to hear what the public has to say. It is conducting a study focusing on the responses to questions about how arbitration affects both consumers and companies.

To comment, mail responses to Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700G Street, N.W., Washington, DC 20552. Or, submit a comment online at Search for CFPB and arbitration.

All submissions must be made by June 23, 2012.

See related:  Credit card arbitration: What it is, how it works, More credit card issuers ditch mandatory binding arbitration

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Legal, Regulatory, and Privacy Issues

Feds back down, OK credit card fee before you even get the card

Reversing position, the agency will allow application and administrative fees to be charged before accounts are opened and with no limit on the amount

See more stories
Credit Card Rate Report
Cash Back

Questions or comments?

Contact us

Editorial corrections policies

Learn more