WASHINGTON — Mandatory arbitration, a flash point for consumer advocates, is much less common at credit unions for credit cards and checking accounts disputes than at big banks, the Consumer Financial Protection Bureau reported Thursday.
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Navy Federal Credit Union, with $6.8 billion in credit card loans outstanding, was the fourth largest of all credit card issuers without arbitration clauses, but that was still dramatically less than what was reported by the top three, with JP Morgan Chase in the No. 1 position with $117.6 billion in credit card loans outstanding followed by Bank of America ($94.8 billion) and Capital One ($77.8 billion).
For checking accounts, 45.6% of the 103 largest banks (representing 58.8% of insured deposits) required arbitration in dispute resolution compared to the 49 largest credit unions (8.7% of insured deposits), where just 4% of deposits used arbitration clauses for checking accounts
Last year, one unidentified credit union started requiring arbitration clauses in checking account contracts. In the process, it became responsible for one-third of all arbitration - subject checking accounts of all credit unions.
Consumer advocates have long considered mandatory arbitration one of the more odious practices in the financial services sector, arguing it deprives victims of the ability to take their grievances to court. Part of the attraction of judicial proceedings for them is that discovery and appeals are embedded in the process while these protections are not available in arbitration.
In addition they contend arbitration may be biased against consumers.
Arbitration proponents contend this mechanism is faster and cheaper for consumers than litigation.
As of the start of June this year, the CFPB barred mandatory arbitration for some mortgage matters.
