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Contracts with Banks and Mandatory Arbitration Clauses

When a consumer feels their bank has treated them unfairly or has not acted right towards them, what avenues they have for pursuing remedies depends on a variety of things. This includes what clauses the contract they have with the bank contains.

One type of clause that can be very impactful in this respect is a mandatory arbitration clause. When such a clause is in a bank contract, it could force a person to take disputes they have with a bank into arbitration. It can bar them pursuing class action litigation against the bank.

Such clauses are fairly common within the financial industry. According to Pew Charitable Trusts estimates, mandatory arbitration clauses are in around three out of every four of the account contracts of banks.

A great deal of debate swirls around these clauses. The financial industry typically argues that such causes can help resolve disputes faster and in a more cost-effective manner. Meanwhile, many consumer advocates argue that such clause could help banks dodge accountability for their actions and can disadvantage consumers.

It appears many consumers aren't terribly fond of these clauses. Pew Trusts survey results point to the ability to sue banks and the ability to join class action litigation against banks being something a large majority of consumers feel they should have.

Given these things, a recent decision the U.S. Senate made connected to such clauses could generate a fair amount of discussion. The decision regarded rules, that had not yet gone into effect, that the Consumer Finance Protection Bureau created that would restrict bank use of these clauses. The senate recently voted to block these new rules from going into force.

One wonders what impact this decision, and future developments regarding mandatory arbitration clauses in bank contracts, will end up having for consumers.

When a consumer is in a dispute with their bank, it can be critical for them to have an accurate idea of the options they have in their particular situation. Skilled attorneys can advise consumers on this. They can also give guidance to consumers on how to fight for their interests within the options available to them.

Source: CBS MoneyWatch, "Wall Street wins big on arbitration, and consumers are mad," Aimee Picchi, Oct. 25, 2017

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