The battle lines over mandatory arbitration clauses with class action bans in consumer finance contracts were drawn about 15 years ago. The war rages on over requiring arbitration to settle disputes between corporations and individuals, and preventing consumers from filing class actions.
In 1925, Congress enacted the Federal Arbitration Act to allow corporations with equal bargaining power to enforce agreements between themselves privately, considering that arbitration may be less expensive and less time-consuming than litigation if sophisticated parties voluntarily agree to arbitrate before a dispute arises. Almost a century later, the Consumer Financial Protection Bureau (CFPB) is considering the appropriateness of foreclosing class actions and mandating arbitration to resolve disputes between financial companies and their customers.
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