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Article: Mandatory Arbitration Latest Subprime Issue in Spotlight.
- Article from:
- American Banker
- Article date:
- July 2, 2002
- Author:
CopyrightCOPYRIGHT 2002 SourceMedia, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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The use of mandatory arbitration clauses, a common practice by financial services firms to keep customer complaints out of court, is drawing increasing attention from state and federal lawmakers, who are mulling some restraints -- particularly in subprime lending.
Courts have generally upheld the legality of mandatory arbitration clauses, in which customers, be they borrowers or investors, agree to submit complaints to a third-party arbitrator in lieu of filing a lawsuit.
And even though a recent ruling in California provided a high-profile exception to that trend, the legislative rumblings appear to represent by far the more likely threat to the ...