Credit Card Companies
“Credit Card Companies and Mandatory Arbitration”
Mandatory arbitration clauses, which essentially strip consumers of their right to go to court, are becoming commonplace, with most consumers completely unaware of their existence or implications. The information is buried in the fine print or worse, simply tacked on to credit card agreements, which most customers don’t even bother to read. If you did read through your credit card terms and conditions, beyond the usual definitions of rates, late fees, annual charges, etc., you will find some interesting things and probably learn at least one new phrase: binding or mandatory arbitration.
Binding arbitration sounds intimidating, and it can be. By including a binding arbitration clause, the credit card issuer is giving notice that if the cardholder has a dispute with the company (including identity theft, fines, penalty or late fee disputes, interest rate guarantees, etc.) he or she cannot sue the card issuer in court. Instead, the consumer must take the case to an arbitrator or judge.
In arbitration, a dispute is handled by a "neutral" third party that hears both sides and makes a decision. Just about any type of dispute, whether it's between a worker and an employer, a retailer and a customer, or an insurance company and a policyholder, can be arbitrated. Attorneys agree that arbitration has its advantages. For one, it's faster. The American Bar Association estimates it takes two years for the average court case to be resolved, compared with 8.6 months for arbitration. Expediency can save thousands in legal costs.
Consumers may not realize they've agreed to arbitration and aren't in a position to negotiate contracts. And even if they shopped around for another credit card, all the lenders use the same mandatory arbitration language in their contracts.
There is also no proof that mandatory arbitration offers a fair outcome. Consumer advocates laugh out loud at the notion that it might be fair, since it's
Mandatory arbitration clauses, which essentially strip consumers of their right to go to court, are becoming commonplace, with most consumers completely unaware of their existence or implications. The information is buried in the fine print or worse, simply tacked on to credit card agreements, which most customers don’t even bother to read. If you did read through your credit card terms and conditions, beyond the usual definitions of rates, late fees, annual charges, etc., you will find some interesting things and probably learn at least one new phrase: binding or mandatory arbitration.
Binding arbitration sounds intimidating, and it can be. By including a binding arbitration clause, the credit card issuer is giving notice that if the cardholder has a dispute with the company (including identity theft, fines, penalty or late fee disputes, interest rate guarantees, etc.) he or she cannot sue the card issuer in court. Instead, the consumer must take the case to an arbitrator or judge.
In arbitration, a dispute is handled by a "neutral" third party that hears both sides and makes a decision. Just about any type of dispute, whether it's between a worker and an employer, a retailer and a customer, or an insurance company and a policyholder, can be arbitrated. Attorneys agree that arbitration has its advantages. For one, it's faster. The American Bar Association estimates it takes two years for the average court case to be resolved, compared with 8.6 months for arbitration. Expediency can save thousands in legal costs.
Consumers may not realize they've agreed to arbitration and aren't in a position to negotiate contracts. And even if they shopped around for another credit card, all the lenders use the same mandatory arbitration language in their contracts.
There is also no proof that mandatory arbitration offers a fair outcome. Consumer advocates laugh out loud at the notion that it might be fair, since it's