Banks Can, and Often Do, Keep You From Joining Class-Action Lawsuits—What Can Be Done

Many contracts for credit cards, checking accounts, prepaid cards, and other financial products include mandatory arbitration clauses, which forbid consumers from settling disputes in court, either individually or as part of a group (or class action), and require them instead to participate in arbitration. In October 2015, the Consumer Financial Protection Bureau announced that it was considering a ban on mandatory arbitration agreements that prohibit class actions. In light of our research showing that these clauses inflict harm by limiting customers’ recourse, Pew urges the CFPB to institute the ban promptly.

In a recent survey, The Pew Charitable Trusts asked consumers their opinions about mandatory binding arbitration. One issue in particular rankles them and is now under scrutiny by regulators: the ubiquitous inclusion in arbitration agreements of language that bars customers from pursuing their claims against a financial services company as part of a class action.