On March 10, the results of an extensive study by the Consumer Financial Protection Bureau were released. The CFPB found that binding arbitration clauses in consumer contracts severely limit their ability to be able to sue a creditor in the event of a legal dispute.
The results also show that only seven percent of consumers even know that a binding arbitration clause is restricting their ability to file a lawsuit against the other party to the agreement. Findings also indicate that more than 50 percent of credit card debtors have arbitration clauses in their agreements, which affects 80 million consumers. In addition, creditors typically obtain favorable rulings in the majority of arbitration cases, and data suggests that there is an abundance of consumer confusion regarding arbitration language.
Opponents to binding arbitration agreements are saying that they favor corporations over consumers, which is unfair in their opinion. Industry groups, however, are arguing that they save money and that those savings have been lowering consumer. However, the study conducted by the CFPB was unable to find substantial evidence to support those alleged lower costs
The Dodd-Frank financial reform bill effectively outlaws arbitration clauses for mortgage contracts. This bill could help consumers by giving the CFPB the ability to start making more rules regarding using them in other consumer agreements.
Consumers who have questions regarding binding arbitration agreements and their ability to sue a creditor, whether it is a matter of credit card debt or an agreement related to some other type of outstanding balance, could seek the help of a bankruptcy attorney. That attorney could advise consumers of their rights regarding creditors and help them determine if filing for bankruptcy protection would be a viable option in their situation.