A U.S. appeals court has reinstated a class-action suit against a group of banks that force their credit card customers to use arbitration instead of the courts to settle disputes. The credit card holders alleged that “the banks in combination with other co-conspirators, including American Express Co and Wells Fargo & Co. illegally colluded to force the cardholders to accept mandatory arbitration clauses in their cardholder agreements.” The card holders argued that the banks had violated antitrust laws “by refusing to issue cards to individuals who did not agree to arbitration.” The card holders are asking the court:

• to stop the banks from compelling arbitration;
• to prevent them from continuing their alleged collusion; and
• to invalidate the existing mandatory arbitration clauses.

A lower court judge sided with the banks, which include Bank of America Corp, Discover Financial Services, Capital One Bank, HSBC, JPMorgan Chase & Co, Citigroup Inc, and units of Washington Mutual Inc. and dismissed the case, saying the card holders lacked standing. The panel of three appellate judges from the U.S. Court of Appeals for the Second Circuit disagreed. The court’s opinion said the “cardholders have adequately alleged antitrust injuries.” The card holders are a large class coming from Pennsylvania, New York, New Jersey and California. Joe Ridout, who is with the nationwide nonprofit group Consumer Action, praised the ruling, saying:

It’s unfair for consumers to have to give up their legal and constitutional rights just to get a credit card.

This case will be watched closely since it involves “public enemy number one” for consumers, and that’s forced arbitration. It’s good to see the courts recognizing that arbitration should never be allowed to be forced on consumers.

Source: Reuters

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