Not reading the fine print really can backfire if you have a problem with your bank or credit card issuer. Arbitration clauses—a common inclusion in consumer contracts—can prevent you from taking the company to court or joining a class-action lawsuit. At least, for now.
A report released Tuesday from the Consumer Financial Protection Bureau could be the first step in rule-making to limit arbitration clauses. The Dodd-Frank Act, which prohibited the use of arbitration clauses in most mortgage contracts, mandated the study and gave the bureau the power to issue regulations if in the public interest and in keeping with the study findings.
"In my view, and in the view of consumer advocates, this study is incredibly thorough," said David Seligman, a staff attorney with the National Consumer Law Center. "The CFPB has much of the information it needs to act, and to act quickly."
As it stands now, by signing a contract with such an arbitration clause included (or just clicking "I agree to the terms and conditions"), consumers agree that either side can block court disputes in favor of having the problem handled by a nongovernmental third party (i.e., an arbitrator). Consumers rarely benefit from that process, said Ira Rheingold, executive director and general counsel of the National Association of Consumer Advocates. "In most cases, you discover you've given up that right when you find out the company cheated you," he said. "You try to go to court and you find out you can't go to court."
"It's just not fair to consumers," added Rheingold.