Many businesses, including financial institutions, are including standard contract language that requires consumers to submit future disputes to mandatory binding arbitration as a necessary condition for doing business. Such clauses severely limit consumers’ redress options because consumers must agree to such conditions or forgo doing business with the institution (see Chapter 12, Personal and Legal Rights—Pre-Dispute Mandatory Binding Arbitration). These clauses frequently prohibit class actions, and the potential relief for individuals is typically outweighed by the cost of arbitration proceedings.
Mandatory Binding Arbitration and Alternative Dispute Resolution: Policy
Mandatory binding arbitration
Mandatory binding arbitration should be prohibited.
Damages for Redress
Consumers should have the right to bring a private cause of action for treble damages.
State law should allow a minimum recovery of at least $2,000 per consumer for each offense, indexed for inflation.
A defendant should be required to pay a consumer’s attorneys’ fees and costs if the consumer prevails in the action.