No Day in Court for Bank Clients

Publication: The Wall Street Journal

Author: Robin Sidel


08/02/2011 - Some small and regional U.S. banks are prohibiting unhappy customers from taking their complaints to court or joining class-action lawsuits, instead requiring them to resolve disputes through arbitration.

The banks are emboldened by a U.S. Supreme Court ruling in April that said state laws can't supersede private contracts that require customers to present their complaints individually to an arbitrator.

The decision attracted attention from financial firms and other companies like cellphone providers that embrace mandatory third-party arbitration for customer gripes, saying it helps them resolve disputes fairly for customers and more cleanly than getting tied up in lengthy and costly court cases.

Consumer advocates say they don't like arbitration because it restricts the ways in which a customer can resolve a dispute, and that consumers are less likely to go through the arbitration process than to sue.

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The nation's largest banks have long included such provisions in credit-card agreements and consumer-deposit products like checking and savings accounts.

According to a recent survey by Pew Charitable Trusts, nearly three-quarters of 265 accounts offered by the 10 largest U.S. banks included mandatory arbitration provisions.

Still, the practice is scattered. Wells Fargo & Co. and J.P. Morgan Chase & Co. both include mandatory-arbitration clauses in their deposit accounts, according to the companies.

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"We need more scrutiny over these things and make sure they are fair to consumers," said Susan Weinstock, a project director at Pew.

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Read the full article No Day in Court for Bank Clients on the Wall Street Journal's Web site.

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