When consumers sign up for a new credit card or checking account, often buried in the fine print of the contract is an arbitration clause. Invented by corporate lawyers, it typically requires consumers to resolve disputes privately through arbitration, not the courts, and bars them from joining together in so-called class-action lawsuits when they feel they’ve been wronged. Over the last decade, these clauses have seeped into millions of financial contracts, according to the Consumer Financial Protection Bureau, which found them to be harmful to consumers. On July 10, to cheers from consumer advocates, the bureau issued a rule restricting use of arbitration clauses. Now President Donald Trump and Republicans who control Congress are on the verge of killing the rule.
They believe it avoids costly, unnecessary lawsuits. Banks and other financial companies say arbitration is faster and cheaper for the public than litigation, and a more appropriate venue than courts to resolve disputes over issues that frequently don’t involve huge sums of money for individual consumers. The finance industry also says that much of the damages won through lawsuits just go to trial lawyers. And companies argue that litigation isn’t needed when regulators are empowered to fine firms for conduct that hurts large groups of consumers.