Banking on Arbitration

Big Banks, Consumers, and Checking Account Dispute Resolution

QUICK SUMMARY

Arbitration is a private dispute resolution process in which a third-party decision maker resolves disputes between opposing parties. Research shows that dispute resolution limitations, such as mandatory binding arbitration clauses, are common in checking account agreements. Many consumers, however, are unaware that these terms could restrict their options, if they have a dispute with their financial institution.

The report, Banking on Arbitration: Big Banks, Consumers, and Checking Account Dispute Resolution, reviews the 100 largest financial institutions' dispute resolution clauses as well as consumer attitudes about these practices. It finds that:

  • The larger the financial institution, the more likely that an account agreement will require mandatory binding arbitration.Over half of the 50 largest financial institutions have arbitration clauses in their account agreements, while only 30 percent of the next fifty contain such clauses.
  • Seventy-five percent of banks with an arbitration clause also include a ban on class action lawsuits.
  • Over half of the account agreements contain clauses where the consumer waives the right to a jury trial.
  • Almost nine in 10 consumers disapprove of the procedural components of arbitration, but half of consumers also support the overall goal of arbitration—to be a simpler, less costly alternative to court.
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