Are Arbitration Clauses Good for Consumers?

May 1, 2012, Written By Lynn Oldshue

Are Arbitration Clauses Good for Consumers?

If you have applied for a credit card, checking account or cell phone,
you have probably signed an arbitration clause that forfeits your right
to a class-action lawsuit or jury trial if something goes wrong.

Signing your name at the bottom of a long legal document has become
a routine part of the process and it is easy to overlook what you are
giving up in the fine print.

“If you want these services, you usually have to sign the agreement,” says
Bill Hardekopf, CEO of LowCards.com. “This is fine until you have a
problem and want to force the company to action. Arbitration usually
gives an advantage to the company.”

The Consumer Financial Protection Bureau announced plans to study
the use of arbitration clauses in financial contracts. They will analyze the
prevalence of arbitration clauses in agreements for consumer financial
products, the types of claims that consumers bring in arbitration cases
and how arbitration affects consumers and companies. Through the
Dodd-Frank bill, Congress gave the agency the power to create
regulations that limit or end the practice.

The CFPB is asking citizens to voice their opinions and experiences
about arbitration as part of its inquiry. Comments must be submitted
by June 23, 2012. Information can be found here.

Companies that use pre-dispute arbitration clauses claim that arbitration
is fair, and it is faster and less expensive than litigation. In two recent
cases, the Supreme Court has sided with companies in favor of binding
arbitration. In January, the Supreme Court overturned a decision by the
U.S. Court of Appeals for the 9th Circuit that cardholders could sue
CompuCredit. In 2011, the Supreme Court agreed that AT&T Mobility
could force customers to settle their disputes through arbitration.

According to the San Francisco Chronicle, the Pew Safe Checking in the
Electronic Age Project of October 2010 researched 265 checking accounts
offered by the ten biggest banks and found that 71 percent had mandatory
arbitration clauses preventing customers from going to court to settle a
dispute.

In 2009, Bank of America dropped the arbitration clause from credit card
agreements in response to a lawsuit. JP Morgan Chase dropped the arbitration
clause from credit card agreements in 2010 for at least 3 1/2 years.


This entry was posted in Credit Card News and tagged No tags added


The information contained within this article was accurate as of May 1, 2012. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Lynn Oldshue

Lynn Oldshue has written personal finance stories for LowCards.com for twelve years. She majored in public relations at Mississippi State University.
View all posts by Lynn Oldshue