Issuers Defend Arbitration Clauses in Credit Card Agreements

Issuers Defend Arbitration Clauses in Credit Card Agreements

American Express, Citigroup and Discover went to court this week to defend charges that they acted together to make customers agree to settle credit card disputes through arbitration instead of class action lawsuits.

The lawsuits were filed by customers who had to agree to arbitration clauses in order to be approved for a credit card. The plaintiffs say that arbitration is more expensive for individuals than if they filed their claims as class action lawsuits.

The plaintiffs are asking the judge to order the three companies to remove arbitration clauses from their cardholder agreements.

The history of arbitration clauses is complicated. A 1996 federal law let consumers take their grievances to court. A year ago, the Supreme Court almost unanimously ruled that federal laws permits credit card companies to enforce the binding arbitration clauses. However, Chase, Bank of America and Capital One have dropped arbitration clauses from their terms and conditions.

To get a credit card, a consumer must sign a detailed agreement. The terms and conditions for many credit cards contain an arbitration clause that says that if consumers want to dispute fees, they must do so through arbitration, not in court.

Here are several examples of arbitration clauses:

American Express

When you use your Account (or sign or keep the Card), you agree to the terms of the Cardmember Agreement that will be provided to you. Your Cardmember Agreement includes an arbitration provision, which impacts your opportunity to have claims related to the account heard in court or resolved by a jury, and to participate in a class action or similar proceeding.

Discover

The Cardmember Agreement provides that we may choose to resolve a claim relating to your account by binding arbitration, in which case, you will not have the right to have that claim resolved by a judge or jury and you will not have the right to participate in a class action in court or arbitration. You may reject the arbitration provision with respect to your new account within 30 days after receiving your Card.

BuyRight Prepaid MasterCard

Any arbitration hearing that you attend shall take place in the federal judicial district of your residence. At your written request, we will consider in good faith making a temporary advance of all or part of the filing administrative and/or hearing fees for any Claim you initiate as to which you or we seek arbitration. At the conclusion of the arbitration (or any appeal thereof), the arbitrator (or panel) will decide who will ultimately be responsible for paying the filing, administrative and/or hearing fees in connection with the arbitration (or appeal). If and to the extent you incur filing, administrative and/or hearing fees in arbitration, including for any appeal, exceeding the amount they would have been if the Claim had been brought in the state or federal court which is closest to your billing address and would have had jurisdiction over the Claim, we will reimburse you to that extent unless the arbitrator (or panel) determines that the fees were incurred without any substantial justification.

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