Mandatory arbitration clauses were created by corporate lawyers about 15 years ago and buried in the fine print of credit card contracts and checking account agreements, but they may not live much longer following the March 10 publication of a three-year study by the Consumer Financial Protection Bureau, Bloomberg reported on Friday. The report confirmed what consumer advocacy groups have long argued: Mandatory arbitration doesn’t much help customers but does prevent expensive lawsuits against banks. The bureau was required to complete the report under the Dodd-Frank Act prior to issuing new regulations. The clauses require customers to use arbitration — not the courts — to resolve disputes and waive their right to be part of a class-action case. The CFPB could ban them outright in consumer finance contracts or just do away with the class-action waivers. The report’s findings presage a pitched battle between the consumer agency and business groups, notably the U.S. Chamber of Commerce, which views arbitration as a way to thwart avaricious plaintiffs’ lawyers.
