Mandatory Arbitration And Class Action Waivers By Amendment: Easier Said Than Done

Highlights

• As arbitration clauses that include class action waivers become more common, banks and credit unions often seek to implement these provisions in response to various types of consumer class actions, including those based on overdraft fees.
• However, even after having done so, the financial institution may be challenged regarding the enforceability of an arbitration clause.
• Two recent decisions illustrate the most common arguments made by plaintiffs and financial institutions.

In response in part to the dozens of cases filed throughout the country related to assessment of insufficient funds (NSF) and overdraft (OD) fees, many banks and credit unions have sought to add arbitration and class action waiver provisions to their deposit agreements. If the financial institution subsequently faces a putative class action based on NSF or OD fees, the institution likely raises the arbitration clause and class action waiver through an early motion. In all