The Supreme Court ruled recently that arbitration clauses should stand and consumers forced to adhere them when disputing credit card charges and fees. This eliminates any judicial remedies and many are now pushing for the Consumer Financial Protection Bureau to investigate these clauses.
Supreme Court Ruling
Led by US Supreme Court Justice Antonin Scalia, the Court ruled 8-1 that consumers who sign credit card agreements (and these are mandatory if you want the card) are bound by the terms and conditions – including the arbitration clauses. This means they are not allowed to sue the credit card company and are forced to go into arbitration for any disputes.
Consumer advocacy groups are none too happy, partly because the arbitration process as a whole is unfair. They say these teams deal with the credit card companies on a regular basis. If a consumer opts to go into arbitration, the team is looking to ensure it’s called on the next time – therefore, it might unfairly rule in the favor of the company. The team may never see you again and feels no sense of loyalty.
As most of know, the credit card agreements are full of details and often, confusing verbiage; and in nearly every single agreement exists an arbitration clause that removes any court remedies for the consumer.
Reversal of Prior Law
Keep in mind, in 1996, there was a law passed that allowed credit card users to fight their card issuers in court. This recent ruling, however, eliminates it. And it’s not limited to your credit card companies. Any loans, with the exception of mortgages, are usually covered in some type of clause that significantly limits your rights as a consumer – at least in terms of how you are able to dispute charges and fees. Michael Calhoun, President of the Center for Responsible Lending, says, “These arbitration clauses have become a ‘get out of jail free’ card.”
CFPB Role
The newly founded Consumer Financial Protection Bureau may have an interesting dynamic to explore. Consumer advocates are pushing for the CFPB to investigate these arbitration clauses in an effort to find a new “happy medium”, so to speak. In fact, some say the only middle road is to eliminate the clauses completely and allow disputes to be heard in a proper legal setting – one where no bias exists. This could effect not only the credit card industry, but the financial sector as a whole.
