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Bank Customers May Get Their Day in Court

The CFPB takes aim at contract clauses that bar class-action suits
Photographer: Getty Images

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. The 728-page 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. “Now that our study has been completed, we will consider what next steps are appropriate,” said CFPB Director Richard Cordray in a statement.

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.