If you are an individual customer with a disagreement with a business, your contract or Terms of Service may include an arbitration clause that explains how certain disputes must be resolved. You might be wondering what exactly arbitration is, how it works, and what your contract with a business requires. In this article, we'll answer your questions and help you understand the consumer arbitration process in general and important factors to keep in mind before filing a case.
What is Consumer Arbitration?
Consumer arbitration is a process for resolving disputes between individual consumers and businesses. Arbitration is a method of alternative dispute resolution (ADR) and can offer a more efficient and cost-effective process than traditional litigation in a court. In arbitration, a neutral third party — the arbitrator — reviews the evidence and arguments presented by both sides and issues a final and binding decision to resolve the dispute.
How Do Consumer Arbitration Agreements Work?
Consumer arbitration agreements are commonly included in contracts between consumers and businesses. These agreements typically state that, in the event of a dispute, the business and the consumer will go to arbitration rather than to court to resolve their dispute. The arbitration agreement typically names an organization, such as the American Arbitration Association® (AAA®), that will administer the dispute resolution process.
When a consumer files an arbitration case with the AAA, the AAA reviews the contract's arbitration clause to determine whether it complies with the AAA’s Consumer Due Process Protocol, and the AAA may decline to administer the arbitration case if the clause does not comply. The Consumer Due Process Protocol establishes minimum fairness standards for consumer arbitration, including requirements relating to costs, impartiality, access to information, hearing procedures, and available remedies.
Does a Consumer Arbitration Agreement Mean I Cannot Go to Court?
Generally, a consumer arbitration agreement requires covered disputes to be resolved through arbitration rather than in court. However, under the AAA’s rules and the Consumer Due Process Protocol, consumers can still bring their claim to small claims court if it is within the jurisdictional limit of the small claims court.
How Much Does Arbitration Cost for the Consumer?
For consumer arbitration cases, consumer fees are often capped. At the AAA, consumer administrative fees are limited under the applicable fee schedule, and businesses are responsible for arbitrator compensation. Fee waivers may also be available for consumers who qualify. In some cases, consumers pay no AAA administrative fee because the business pays the consumer’s share or the AAA waives the fee. Fees are structured in this way so that arbitration remains an accessible option for consumers.
How Long Does a Consumer Arbitration Case Last?
Consumer arbitration can resolve disputes substantially faster than litigation. For AAA consumer arbitration cases awarded in 2025, the median time to award was just over nine months, while the median time to trial in U.S. District Courts (all civil cases) was just over 34 months. Consumer arbitration cases sometimes resolve much faster — the quickest time to award for a AAA consumer arbitration case closed in 2025 was only 2.3 months.
The Consumer Arbitration Process
Initiating the Case
At the AAA, a consumer arbitration case generally begins when the consumer files a Demand for Arbitration, provides a copy of the applicable arbitration agreement, and pays the administrative filing fee or seeks a fee waiver. The consumer must also provide the business with a copy of the Demand and supporting materials. Once the consumer’s filing requirements are satisfied, the AAA notifies the parties that the case has been received and requests that the business pay its share of the administrative filing fee. Once the business pays and the AAA acknowledges that the case will proceed, the business may, but is not required to, file an answer.
Arbitrator Selection & Preliminary Steps
After the initial filing stage, the AAA generally appoints a neutral arbitrator from its panel unless the parties' arbitration agreement specifies another selection process. Once appointed, the arbitrator may hold a preliminary hearing with the parties to organize the case. During that conference, the arbitrator and parties may clarify the claims and issues, establish deadlines, schedule any hearing, and address the exchange of information.
The Arbitration Hearing
At the arbitration hearing, each party has an opportunity to present their case to the arbitrator. The consumer — whether self-represented or represented by an attorney — presents evidence supporting their claim, followed by the business’s evidence in support of their defenses. Hearings are generally held virtually or through another method approved by the arbitrator, unless the parties agree otherwise or the arbitrator determines that an in-person hearing is appropriate. Some consumer cases may be resolved through document submissions, without a hearing.
The Arbitrator's Award
After the hearing, the arbitrator prepares a written award resolving the dispute. Under the AAA Consumer Arbitration Rules, the award generally must be issued within 30 calendar days after the hearing closes, or within 14 calendar days in a documents-only proceeding. The award includes a brief written explanation of the decision unless all parties agree otherwise. The arbitrator may award financial compensation or other relief allowed by law. Arbitration awards are legally binding, and judgment on an award may be entered in a court with jurisdiction.
The Role of the AAA in Consumer Disputes
The AAA is committed to the fair and impartial resolution of consumer disputes. The AAA’s Consumer Due Process Protocol, developed with input from a broad group of consumer advocates, academics, judges, and business representatives, establishes important fairness standards for the consumer dispute resolution process. The AAA reviews consumer arbitration agreements for compliance with these due process standards before administering cases.
The AAA provides access to experienced, independent arbitrators with the qualifications needed to manage and decide a wide range of consumer disputes. In cases closed in 2025, more than $26 million was awarded to consumers in AAA-administered individual consumer cases. From filing through final resolution, the AAA provides an established framework designed to keep the process fair, efficient, and accessible for all parties.
Learn more about our consumer arbitration panel, rules, and commitment to due process: