Many of the largest U.S. credit-card companies require customers to sign away their ability to take disputes to court. Instead consumers are required to settle disagreements in arbitration. A lawsuit filed in New York federal court alleges eight leading credit card companies violated U.S. antitrust laws by colluding to promote arbitration of customer disputes. The Wall Street Journal reported on this suit in its September 1st issue. The complaint alleges Bank of America Corp., Capital One Financial Corp. Corp., J.P. Morgan Chase & Co, Morgan Stanley’s Discover unit, Citigroup Inc., MBNA Corp., Providian Financial Corp., and Britain’s HSBC Holdings plc “combined, conspired and agreed to implement and/or maintain mandatory arbitration.” The companies allegedly held secret meetings where they colluded to promote arbitration, in violation of federal antitrust laws.
The suit was filed in August on behalf of seven plaintiffs who live in California, Pennsylvania, New York, Illinois, and New Jersey. Some of the banks named allegedly convened a group in 1999 called the “Arbitration Coalition” or “Arbitration Group,” according to the Journal. The suit seeks class action status. It claims that bank representatives spoke or met at least 20 times from 1999 to 2003 to share experiences from arbitration as well as advice on how to set up arbitration agreements with consumers that would withstand challenges in court.
In general, it is illegal under federal antitrust law for competitors in any industry to secretly collude to restrict trade or commerce. This is a most important lawsuit and one that consumer groups should back. A recent study by Ernst & Young, citing criticism of arbitration, reported that while consumers sometimes can opt out of mandatory arbitration clauses, they rarely know such an option exists. Usually that option is buried in a card agreement’s fine print. Most card holders don’t even know an arbitration agreement is hidden in their contract.
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