Capital Briefs: Justices Approve Mandatory Arbitration Clauses

The Supreme Court on Monday gave a big boost to banks that include mandatory arbitration clauses in their consumer account contracts.

Justice Ruth Bader Ginsburg, writing for an eight-to-one majority, said companies do not have to worry about state restrictions on arbitration agreements. Rather, she said the Federal Arbitration Act supersedes the state laws.

Thomas Greco, associate general counsel at the American Bankers Association, said the ruling means banks that use arbitration agreements won't have to worry about complying with 50 different state laws. "This is beneficial to industries like banking which is moving into greater use of these arbitration agreements," he said. "It is encouraging that those types of clauses will be enforced."

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