Contract and Choice

This Faculty Working Paper has been published and posted within the University of Georgia Law Faculty Scholarly Works series within Digital Commons. It is currently available at here.


This paper contributes to an ongoing debate, afoot in academic, legal and policy circles, over the future of consumer arbitration. Utilizing a newly available database of credit card agreements, the article offers an in-depth examination of dispute resolution practices within the credit card industry. In some respects, the data cast doubt on the conventional wisdom about the pervasiveness of arbitration clauses in consumer contracts and the presence of unfair terms. For example, the vast majority of credit card issuers do not utilize arbitration clauses, and by the end of 2010, the majority of credit card debt was not subject to such an agreement. Likewise, while the use of class waivers is widespread in arbitration clauses, most clauses lack the sorts of unfair procedural terms for which arbitration is often criticized. The upshot of these and other findings is that consumers, in some respects, have more choice in their contracts than the literature suggests. Our work also responds to the suggestions of some scholars that businesses favor arbitration clauses in their consumer contracts but not their business-to-business agreements. On the contrary, our research suggests that the difference may not be as dramatic as previous research suggests. These results hold important implications for ongoing policy debates, including the work of the newly minted and controversial Consumer Financial Protection Bureau (“CFPB”). The CFPB has been charged with studying and, if appropriate, regulating the use of arbitration clauses in credit card agreements. Our findings signal a note of caution and suggest that a blanket prohibition on the use of arbitration clauses would be difficult to defend under principles of administrative law.