Right now, most credit card consumers are required to agree to mandatory arbitration when disputes arise in order to receive their credit card. But according to an article in the Dallas Morning News, mandatory arbitration clauses in credit card agreements and other consumer agreements may be in its final days.
The article said:
“…the Obama administration’s proposal to create a Consumer Financial Protection Agency includes giving the agency broad authority to restrict or eliminate consumer arbitrations…J.P. Morgan Chase will no longer submit credit card disputes to arbitration and is re-evaluating the inclusion of arbitration provisions in its consumer contracts. Bank of America also has dropped a requirement that consumers settle disputes through arbitration. In addition, the American Arbitration Association is no longer handling consumer-debt-collection disputes until new guidelines are established.”
These are huge develops pointing towards the elimination or restriction of mandatory arbitration for credit card consumers. But unfortunately, at this point in time, most credit card consumers are required to sign mandatory arbitration clauses that close off access to the court system in the case of a dispute with the credit card lender.
But there are also other “cons” to mandatory arbitration:
- Arbitrators make huge amounts of money from credit card disputes and therefore have a high incentive for ruling in the favor of the credit card company as opposed to the consumer.
- The credit card companies are the ones who choose the arbitrator–can we see the problem with this?
- The decision made by the arbitration is final and binding, there is no appeals process.
As of now, most credit card consumers are stuck with mandatory arbitration, so it’s important to be aware of the pitfalls of this system and to make sure you work with an attorney in the process. Otherwise you could find yourself “outgunned” by the credit card company who has already stacked the deck in their favor.