Contract and Choice

46 Pages Posted: 5 Jul 2012 Last revised: 4 Oct 2015

See all articles by Peter B. Rutledge

Peter B. Rutledge

University of Georgia School of Law

Christopher R. Drahozal

University of Kansas School of Law

Date Written: November 5, 2012


This Article 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 sort 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 proposed Arbitration Fairness Act pending in Congress as well as the work of the newly-minted and controversial Consumer Financial Protection Bureau (“CFPB”). Our findings suggest that the Arbitration Fairness Act may be based on faulty empirical premises and that the blanket prohibition contained in the Act may be overbroad. Our findings also provide a model that the CFPB might follow in conducting its statutorily-required study of the use of arbitration clauses in consumer financial services contracts.

Keywords: Arbitration, dispute resolution, credit card agreements

JEL Classification: K12, K41

Suggested Citation

Rutledge, Peter B. and Drahozal, Christopher R., Contract and Choice (November 5, 2012). Brigham Young University Law Review, Forthcoming. Available at SSRN:

Peter B. Rutledge

University of Georgia School of Law ( email )

225 Herty Drive
Athens, GA 30602
United States

Christopher R. Drahozal (Contact Author)

University of Kansas School of Law ( email )

Green Hall
1535 W. 15th Street
Lawrence, KS 66045-7577
United States
785-864-9239 (Phone)
785-864-5054 (Fax)

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