This document outlines the debate around arbitration in consumer contracts and proposes a centrist approach. It discusses how the Federal Arbitration Act of 1925 enforced arbitration clauses but consumer protection laws from 1965-2015 have sought to regulate these contracts. There are left and right perspectives: the left wants to limit arbitration enforcement and give courts more review power, while the right wants to fully enforce arbitration as agreed. The author proposes that if arbitration clauses are enforced, courts should initially hear defenses and review awards for legal errors. However, arbitrators should still handle most issues to avoid undermining arbitration.

1. Arbitration and the Consumer
Financial Protection Bureau:
A Centrist Proposal
Stephen J. Ware
Professor of Law
University of Kansas
ware@ku.edu

4. Federal Arbitration
Act (FAA)
enacted in 1925
Pro-Contract
Enforce adhesive
arbitration clauses
“save upon such
grounds as exist at law
or in equity for the
revocation of any
contract.”
Consumer
“Protection” Law
1965-2015
Anti-Contract
“Protect”
consumers by
regulating terms of
adhesion contracts.

5. Left Right
Don’t enforce consumers’
adhesive arbitration
agreements.
Enforce consumers’
adhesive arbitration
agreements.
But if they are enforced,
courts should hear defenses
to enforcement like fraud,
duress & unconscionability.
Arbitrators, rather than
courts, should hear
defenses.
Don’t enforce class waivers. Enforce class waivers.
Courts should vacate
legally-erroneous
arbitration awards.
Courts should confirm
legally-erroneous
arbitration awards.

6. Left Right
Consumers, employees and other ordinary
individuals should not be able to form
enforceable adhesive arbitration
agreements.
Consumers, employees and other ordinary
individuals should be able to form
enforceable adhesive arbitration
agreements.
But if the law does enforce adhesive
arbitration agreements, then courts
should be able to initially hear defenses to
their enforcement and to the enforcement
of the contracts containing them.
Arbitrators, rather than courts, should
initially hear defenses to the enforcement
of the contracts containing such
agreements and sometimes even to the
enforcement of the arbitration agreement
itself.
Adhesive arbitration agreements’ class
waivers should not be enforced at all, or
at least should not be enforced under
circumstances in which such waivers in a
non-arbitration agreement would be
unenforceable.
Adhesive arbitration agreements’ class
waivers should be enforced under
circumstances in which such waivers in a
non-arbitration agreement would be
unenforceable.
Courts should vacate awards arising out of
adhesive arbitration agreements upon
grounds not currently found in the FAA,
particularly legal error by the arbitrator.
Courts should vacate awards only under
the very narrow grounds expressly stated
in the FAA, which do not include “error of
law” by the arbitrator.

7. Left Right
Consumers, employees and other ordinary
individuals should not be able to form
enforceable adhesive arbitration
agreements.
Consumers, employees and other
ordinary individuals should be able to
form enforceable adhesive arbitration
agreements.
But if the law does enforce adhesive
arbitration agreements, then courts
should be able to initially hear defenses
to their enforcement and to the
enforcement of the contracts containing
them.
Arbitrators, rather than courts, should
initially hear defenses to the enforcement
of the contracts containing such
agreements and sometimes even to the
enforcement of the arbitration agreement
itself.
Adhesive arbitration agreements’ class
waivers should not be enforced at all, or
at least should not be enforced under
circumstances in which such waivers in a
non-arbitration agreement would be
unenforceable.
Adhesive arbitration agreements’ class
waivers should be enforced under
circumstances in which such waivers in a
non-arbitration agreement would be
unenforceable.
Courts should vacate awards arising out
of adhesive arbitration agreements upon
grounds not currently found in the FAA,
particularly legal error by the arbitrator.
Courts should vacate awards only under
the very narrow grounds expressly stated
in the FAA, which do not include “error of
law” by the arbitrator.

8. Arbitration and the Consumer
Financial Protection Bureau:
A Centrist Proposal
Stephen J. Ware
Professor of Law
University of Kansas
ware@ku.edu