Credit Cards Move Away From Forced Arbitration
Sunday, December 27th, 2009 at 11:35 am
Most consumers are unaware of the fact that they’ve given up the right to sue their credit card company. Instead, nearly every credit card agreement imposes forced arbitration in the event a dispute arises.
The financial institutions claim doing so cut costs, but consumer advocacy groups argue that it is unfair to customers. “Customers come to our message board all the time talking about how they are going to sue, but they’re left shell-shocked when they discover the truth” says Jennifer Holter, editor at Credit Card Forum (a message board for credit card reviews).
In what is being hailed as a major win for consumers, a number of banks have dropped their mandatory arbitration clauses during the past few months; Bank of America, Chase, and Capitol One. Although they largely claim the moves are voluntary, in reality it is probably from the pressure of a pending class action lawsuit filed by Philadelphia-based Berger & Montague. The suit alleges that credit card companies unlawfully colluded on arbitration terms. There are still four defendants listed in the lawsuit who have not yet settled; The National Arbitration Forum, Discover Financial Services, Citibank, and HSBC.
It’s important to note the credit card issuers whom have dropped their arbitration clauses may re-impose them in future. Reportedly, Capital One and Bank of America have only agreed to do so for three-and-a-half-years. None of the defendants who have settled admit liability or wrongdoing.
Tags: arbitration, banking law, credit card forum, Credit Cards