Banking on Arbitration: Big Banks, Consumers, and Checking Account Dispute Resolution

Nov 01, 2012
  • Description

Checking accounts are the cornerstone of household financial management, with nine out of 10 Americans using them to deposit earnings, pay bills, manage money, and build an ongoing relationship with a financial institution. However, despite this widespread use, consumers often are unaware of the terms of their checking account agreements. For instance, Pew found that many consumers are unaware that account agreements restrict their options if they have a dispute with their financial institution. Pew's prior research on terms and conditions of checking account agreements revealed that limitations on dispute resolution, including mandatory binding arbitration clauses, are common. These clauses require consumers to submit all complaints against their financial institution to a third-party decision maker (called an "arbitrator") instead of to a court. Building on earlier research, this report studies the account agreements of the 100 largest retail banks and credit unions by deposit volume to determine the prevalence of mandatory bindingarbitration clauses and other dispute resolution terms. Of these, Pew was able to obtain 92 checking account agreements (85 banks and 7 credit unions). (See Appendix A for list of financial institutions.) The focus was only on what was disclosed in these agreements, not additional rules and procedures required by the private arbitration companies. Additionally, Pew commissioned a survey of 603 consumers to ascertain American attitudes toward mandatory binding arbitration in checking accounts. (See Appendix B for additional discussion of methodology.)