Mandatory Arbitration and Class Action Waiver

What it is

If you have a dispute with Square, you generally must resolve it through individual arbitration rather than through the courts or as part of a group lawsuit. This means you give up the right to sue Square in court or join a class action.

Why it matters (compliance & governance perspective)

This arbitration requirement modifies the dispute resolution mechanism available to users by substituting arbitration for judicial proceedings and eliminating collective action mechanisms. The operational effect is that disputes proceed through a private arbitration process with a single arbitrator rather than through class or representative court actions.

Consumer impact (what this means for users)

Users who agree to these terms give up their right to take Square to court or participate in a class action lawsuit, and instead must resolve disputes through individual arbitration, which is typically a private process administered by a neutral arbitrator rather than a judge.

What you can do

Institutional analysis (Compliance & governance intelligence)

REGULATORY LANDSCAPE: The Federal Arbitration Act governs the enforceability of this clause in most U.S. jurisdictions. The CFPB has historically scrutinized mandatory arbitration and class action waivers in consumer financial services contracts; while a prior CFPB rule that would have restricted such clauses was overturned by Congress in 2017, regulatory posture in this area may evolve. The FTC retains authority over unfair or deceptive practices that could interact with how this clause is disclosed and implemented. GOVERNANCE EXPOSURE: High. Mandatory arbitration combined with a class action waiver is one of the most litigated provision types in consumer and small-business financial services agreements. Courts in California and other jurisdictions have periodically declined to enforce such waivers, particularly where they are found unconscionable or insufficiently disclosed, though outcomes are fact-specific and jurisdiction-dependent. JURISDICTION FLAGS: California courts have the most active track record of scrutinizing class action waivers in consumer contracts. EU users may have rights under applicable consumer protection directives that override arbitration clauses, making enforcement of this provision against EU residents uncertain. The agreement designates California law as governing, which creates additional complexity regarding enforceability against non-California users. CONTRACT AND VENDOR IMPLICATIONS: B2B procurement teams and merchants onboarding Square should flag this clause for review, particularly if their own agreements with customers include dispute resolution provisions that conflict. The clause asserts that even questions about the arbitration agreement's scope are decided by the arbitrator, not a court, which further limits judicial oversight. COMPLIANCE CONSIDERATIONS: Legal teams should determine within the 30-day opt-out window whether the organization wishes to preserve its right to court-based dispute resolution. Compliance teams should document the opt-out decision and maintain records of the notice sent. Organizations with operations in the EU or UK should assess whether this clause is compatible with applicable consumer protection law in those jurisdictions.

Applicable agencies

Applicable regulations

Provision details

Other risks in this policy

• Fund Hold Authority high
• Termination Without Notice medium
• User Indemnification medium
• Limitation of Liability medium
• Governing Law and Jurisdiction low
• Modifications to Terms medium

Related Analysis

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