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State bankers unite against arbitration rule

Joe Mont | July 18, 2017

Representatives of state banking associations have expressed their displeasure with a new rule from the Consumer Financial Protection Bureau that curtails the use of mandated arbitration.

Many consumer financial products like credit cards and bank accounts have arbitration clauses in their contracts that prevent consumers from filing class-action lawsuits and require the use of arbitration.

Mandatory arbitration clauses typically state that either the company or the consumer can require that disputes between them be resolved by privately appointed individuals (arbitrators) except for individual cases brought in small claims court.

While these clauses can block any lawsuit, companies almost exclusively use them to block group lawsuits, which are also known as “class action” lawsuits, a CFPB statement explains.

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