Arbitration Rule

The CFPB’s arbitration rule would restore consumers’ ability to join together in court to hold banks and lenders accountable when they break the law.


Banks and lenders bury terms in the fine print to block consumers from challenging fraud or hidden fees in court. Instead, these “ripoff clauses” force harmed consumers to challenge large corporations one by one in arbitration – a secretive system designed to favor banks and lenders.

Known as forced arbitration, this practice deprives consumers of their constitutional right to an impartial judge or jury. Instead, banks choose a private arbitration firm to decide the dispute, and consumers have little opportunity to present evidence or appeal a bad decision.

Many ripoff clauses also bar consumers from talking about what happened to them, keeping corporate scams and fraud out of the public eye. Indeed, reports show Wells Fargo customers tried to sue the bank over fake accounts as far back as 2013. But customers were kicked out of court and unable to share their stories because of these fine-print provisions – while Wells Fargo knowingly profited from fraud for another three years.

Acting at the direction of Congress, the U.S. Consumer Financial Protection Bureau (CFPB) spent over three years conducting the most comprehensive study on arbitration ever done. The data revealed that just 25 consumers pursue arbitration claims of less than $1,000 each year, as the vast majority of Americans simply give up when forced into arbitration. The study also suggests that consumers lose in arbitration, even when they win. Only 9% of consumers succeed in arbitration, and even those who win recover just 12 cents of every dollar claimed. In contrast, companies win 93% of the time, recovering 98 cents per dollar.

Following the study, the CFPB proposed a rule to restore customers’ ability to join together in court to hold banks and lenders accountable when they break the law and return transparency to arbitration by creating a public record of claims and outcomes.


Tell Congress to End Forced Arbitration!
This action is hosted by the National Consumer Law Center.


Credit Cards: Tracy Kilgore, New Mexico

In July 2011, Tracy Kilgore was volunteering as a treasurer for a non-profit organization, the Daughters of the American Revolution. She went to a local Wells Fargo branch to change a signature card on behalf of the organization. Tracy did not personally bank with Wells Fargo or have any accounts with them. While there, the bank teller asked her for her name and ID and began typing away her computer. Tracy left once the change was processed.

Two weeks later, Tracy received a letter from Wells Fargo saying her credit card application had been rejected. But she had never applied for one. When Tracy saw the application had been filed in her name the day after she had visited the Wells Fargo branch, it became clear the bank stole her personal information and tried to open a fraudulent credit card in her name.

Soon after, Tracy found the rejected credit application was listed on her credit report, hurting her score and ability to get credit in the future. She called and wrote to Wells Fargo for months to try to get them to correct her report, but they kept delaying – saying it would take another 7-10 days, then another 2-3 weeks, to no avail. In the end, Tracy never even got an apology.

Now, she has joined with other defrauded customers in a class action lawsuit against the bank, but Wells Fargo is trying to force each consumer to fight them one-by-one in a biased and secretive arbitration system. Even though Tracy is not a Wells Fargo customer, the bank is trying to block her from suing them in court by pointing to a ripoff clause she never signed.

Auto Financing: Sergeant Charles Beard, California

Sergeant Charles Beard was about to be deployed to Iraq and asked for some help making his car payments. His lender, Santander Consumer USA, Inc., offered him a forbearance for a few months, but in exchange, had Sergeant Beard sign a modified lease agreement. Little did he know, a forced arbitration provision was buried in the fine print.

While serving his country in Iraq, Sergeant Beard fell behind in his payments.  Men came to his home and repossessed the car – breaking federal law, which protects active duty soldiers by requiring lenders to obtain court orders before seizing their cars. Sergeant Beard brought a class action against the lender with other soldiers to enforce their protections under federal law, but their claims were thrown out due to a class action ban in the arbitration clause.

Debt Relief: Bernardita Duran, New York

Bernardita Duran was 53 years old with only $700 in Social Security income when she paid an Arizona debt relief company to settle her credit card debts. Four thousand dollars later, Ms. Duran realized she had been scammed. She sued the company in New York federal court to get her money back, but the company pointed to a clause in their contract which stated her claims must be decided a private arbitrator – located in Arizona.

Ms. Duran protested that she could not afford to travel to Arizona, as it would cost more than a month’s worth of her income and prevent her from making rent. But the appeals court ruled that only the arbitrator in Arizona could decide if Ms. Duran could bring her claim in New York – meaning she would have to first travel across the country to Arizona to argue to the arbitrator that it’s unfair and unconscionable to force her to arbitrate her case there.


The U.S. Chamber of Commerce – on behalf of big banks and predatory lenders – has been working since 2010 to throw every possible roadblock in the way of the CFPB fulfilling its charge. For an organization that works to restrict our access to the courts, the Chamber is a prolific litigator. A recent Public Citizen report found that their Litigation Center files a suit or amicus brief every other day of the work week.

In fact, the Chamber advocates for restricting consumer and small business access to the courts with forced arbitration and class action bans more often than any other issue. In just three years, their Litigation Center tried to kick consumers and small business out of court and into forced arbitration 112 times – by filing briefs in court supporting big corporations’ use of forced arbitration and class action bans.

While claiming to represent American small business, the Chamber filed a brief in support of foreign multinationals nearly twice as often as it filed to support domestic small business. Similarly, nearly 60 percent of Chamber briefs support at least one Fortune 500 company, but just 7% supported even one small business.

TABLE: Political Spending by Opponents of the Arbitration Rule

Industry/Group Lobbying Political Spending % Political Spending to Republicans
 U.S. Chamber  $79,205,000 (2016)  $29,420,085 (2016) 99%
 Commercial banks  $64,072,735 (2015)  $40,807,098 (2016) 69%
Finance/credit companies $33,847,594 (2015) $11,578,173 (2016) 62%



Amanda Werner, Americans for Financial Reform & Public Citizen,, (202) 973-8004

Christine Hines, National Association of Consumer Advocates,, (202) 452-1989 x109

Lauren Saunders, National Consumer Law Center,, (202) 595-7845


Wells Fargo’s Use of Forced Arbitration to Deny Consumers Justice
Fair Arbitration Now: October 2016

CFPB Arbitration Rules Receives Strong and Widespread Support
Fair Arbitration Now: September 2016

Beware the Fine Print
The New York Times: October 2015

Arbitration Study: Report to Congress
Consumer Financial Protection Bureau: March 2015