Published: June 2014

Gauging attitudes about forced arbitration

The use of forced arbitration clauses continues to undermine consumer protection. Used by big banks and corporations, consumers are often unaware they are agreeing not to take their cases to court or join class actions when they sign phone contracts, open a checking account or "like" a company on Facebook. The Consumer Financial Protection Bureau (CFPB) will conduct a survey credit card holders to see what consumers know and how they feel about signing away their legal rights in return for being a customer.

In a letter to the Consumer Financial Protection Bureau (CFPB), Consumer Action joined advocates in support of the agency's plan to survey credit card holders and inquire how much they know about arbitration clauses in contracts for every day consumer financial services and products. In forced arbitration, a company requires a consumer to submit any dispute that may arise to binding arbitration as a condition of buying a product or service - in other words, if you sign on the dotted line, or even "like" the company on Facebook, you agree to these terms. Consumers are required to waive their rights to sue, to participate in a class action lawsuit or to appeal the outcome of arbitration. In mandatory arbitration the arbitrator’s decision is binding and the result is not public. Many consumers are unaware or misinformed about these often confusing policies and would probably not agree if they understood the consequences.

A recent incident with General Mills demonstrates that consumers object to forced arbitration when they are informed. In April 2014, a New York Times article explained that General Mills had introduced terms that required customers to “give up their right to sue the company if they download coupons, ‘join’ it in online communities like Facebook, enter a company-sponsored sweepstakes or contest or interact with it in a variety of other ways.” Angry customers flooded General Mills with complaints, causiing the company to drop its forced arbitration clause.

The groups siging the letter said they "fully expect the CFPB survey to further substantiate [that] most consumers are unaware of—or substantially misinformed about—forced arbitration provisions.

Lead Organization

National Association of Consumer Advocates (NACA)

Other Organizations

American Association for Justice | Alliance for Justice | Consumers for Auto Reliability and Safety | Center for Justice & Democracy | Center for Responsible Lending | Citizen Works | Consumer Action | Consumers Union | Homeowners Against Deficient Dwellings | Home Owners for Better Building | NAACP | National Association of Consumer Advocates | National Consumer Law Center (on behalf of its low-income clients) | National Consumers League | National Council of La Raza | National Fair Housing Alliance | Public Citizen | US PIRG

More Information

For more information, please visit the NACA website.

Download PDF

Gauging attitudes about forced arbitration   (CFPBSURVEYGROUPCOMMENTS6-2014.pdf)

 
 

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