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Banking Arbitration Hurts Consumers, Regulator Says

In this March 5, 2012, file photo, consumer credit cards are posed in North Andover, Mass. The three largest credit reporting agencies will change the way they handle records in a major revamp long sought by consumer advocates. The changes were announced Monday, March 9, 2015, after talks between Equifax, Experian, TransUnion and New York Attorney General Eric Schneiderman. (AP Photo/Elise Amendola, File)
In this March 5, 2012, file photo, consumer credit cards are posed in North Andover, Mass. (AP Photo/Elise Amendola, File)

 

WASHINGTON (SFGate.com) — Arbitration clauses in the fine print of credit card and checking account agreements harm consumers by limiting the compensation they can receive in disputes with financial firms, the nation’s top consumer financial guardian said.

More than 75 percent of consumers didn’t know if they were subject to the clauses, many of which limit the ability to go to court to settle disputes, according to a study released Tuesday by the Consumer Financial Protection Bureau.

Fewer than 7 percent of those covered by arbitration provisions knew that the terms restricted the ability to sue or participate in class-action cases, the study found.

Those class-action suits often produce larger payments to consumers than arbitration proceedings, the consumer bureau said.

The provisions allow either the financial firm or the consumer to require that any dispute be settled by a private arbitrator instead of in court.

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