Credit Card Binding Arbitration: When Ignorance Isn't Bliss
|Rebecca Lindsey is a staff writer for Credit Ratings.com.
offers a consumer report of US credit cards and instant online approvals. Named
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people want to go to court, but there are times when it is necessary
to preserve your rights and to fight unfair or illegal treatment.
Watch out for mandatory arbitration clauses in your credit card
agreements, which can prevent you from having your day in court.
the years, the phrase “read the fine print” has become more
important than ever. It’s a battle cry—and sage advice—used by
consumer advocates that is well worth heeding, particularly when it
comes to credit cards.
you read through your credit card terms and conditions, beyond the
usual definitions of rates, late fees, annual charges, etc.,
you’ll find some interesting things and probably learn some new
phrases: such as universal default clause and binding or mandatory
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 can’t sue the card issuer in court.
Instead, they must take the case to a private arbitrator or judge.
Bilker, founder of DebtSmart.com,
notes “If binding arbitration applies to your credit card terms,
and it probably does, then you have waived your right to a jury
trial. If there is a dispute you must use arbitrators to resolve the
one other thing: the arbitrator is chosen and hired by the credit
process of an arbitration hearing can be daunting, particularly to a
consumer facing a giant in the credit card industry. Credit card
issuers hire arbitrators through independent companies, such as the
National Arbitration Forum and the American Arbitration Association,
who actively market their services to the issuers. Consumers often
enter an arbitration hearing alone from their side since hiring
representation is not cost-effective.
to Paul Bland, an attorney with Trial
Lawyers for Public Justice, once an arbitrator has made their
decision in a hearing it is next to impossible to do anything about
it through appeal or dispute. Plus, if a consumer brings a case and
the consumer loses, the consumer can be made to pay the
has it gotten this far?
arbitration clauses are everywhere these days. According to givemebackmyrights.com,
which operates in part from a grant from AARP, mandatory arbitration
clauses can also be found in health insurance contracts, telephone
contracts, car contracts, rental clauses, bank loans, house repairs,
etc., etc. Most consumers are in at least one binding arbitration
contract and don’t even know it.
have consumers lost their right to have their day in court? By
entering into agreements without clearly understanding the terms of
those agreements. Bland relays, “Few consumers read and understand
all of the terms and conditions of the credit cards that they use.
Therefore, not enough consumers are in the know about binding
arbitration to produce a public outcry.”
agree that arbitration is a useful procedure for resolving legal
conflict and helping with clogged up court dockets--when the
opposing sides are on equal footing and both agree to the
arbitration. Not so much when it’s a multi-million dollar company
against a lone consumer who may or may not have realized that the
binding arbitration clause even existed.
can consumers do?
gives some guidelines for consumers regarding mandatory
First and foremost, reread (or read for the first time) your
credit card terms to find out if you are currently in a binding
arbitration agreement. If so, consider switching to a card that
does not have such a clause.
ignore changes in terms.
If you receive a change in terms in the mail, don’t treat it
as junk mail and ignore them. Read them or call the issuer and
ask that the change in terms be verbalized. If you haven’t
already, create a file for your credit cards for the original
terms and any changes in terms that you receive. This is a small
effort that will go a long way to keeping yourself educated and
up-to-date. If the change in terms is disagreeable don’t
accept them, meaning: don’t use your credit card anymore.
Start shopping for one that has more satisfactory conditions-
the "Card Reports" section of CardRatings.com is a
great place to comparison
shop for a credit card.
settle for mandatory arbitration.
“The best defense against all [disagreeable] bank actions is
to pick another bank,” adds Bilker. “We must use our power
as consumers to reward good companies and punish the bad ones
because the law may not be on our side when we need it.”
credit cards without mandatory arbitration clauses are getting
harder to come by. According to Bland, some organizations such as
AARP have enough muscle with credit card issuers to insist that the
mandatory arbitration clause not be applied to cards issued with
their name. (The same issuers typically include the clause in other
cards they distribute.) Additionally, credit unions and smaller
banks are usually more consumer friendly than the big card issuers
and do not include such clauses.
and when you decide to switch over to another card to avoid binding
arbitration, Bland suggests letting the company know exactly why
you’re doing so. While you may think that one complaint won’t
accomplish much, if enough consumers stop carrying a card for a
particular reason the point will soon be made.
is getting harder to find credit cards that have acceptable terms,
but they’re out there. They may be more obscure cards, and they
may not have nearly the perks that your current card carries. But if
you’re not a perk junkie, then you may want to consider them. In
the long run, aren’t your rights more important than reward