The U.S. Supreme Court has ruled that consumers who sign credit card agreements that contain an arbitration clause cannot dispute fees or charges in court. The 8-to-1 decision justifiably drew immediate fire from a number of consumer advocates. To get a credit card, a consumer generally must sign a detailed agreement. In the fine print, which sometimes is not only too small to read, but often in a long, wordy document, there will almost always be an arbitration clause. It will say that if consumers want to dispute fees, they must do so through arbitration, not in court. A 1996 federal law allowed consumers to take those disputes to court. But in this most recent ruling, the Supreme Court said arbitration clauses in those agreements trump that law.
Michael Calhoun, president of the Center for Responsible Lending, says the ruling gives companies that provide credit cards, student loans and car loans the ability to exact any fee, because consumers will have no legal recourse. He points out that almost every loan agreement now includes an arbitration clause. “These arbitration clauses have become a ‘get out of jail free’ card,” according to Mr. Calhoun. The main exception is for mortgage loans, where such clauses are currently prohibited, and hopefully that won’t change.
Lauren Saunders, the managing attorney at the National Consumer Law Center, correctly states that the arbitration process itself is unfair largely because the arbitrators usually have a financial incentive to rule against consumers. She says the desire to stay on good terms with the industry and stay on the list of arbitrators has to be a motivation for the arbitrators who hear these claims. Ms. Saunders asks an interesting question: “Who are you (the arbitrator) going to favor, the company that might send you more business, or the consumer who you’ll never see again?” How did you think an arbitrator would answer that question?
I don’t believe this ruling will be the last word on this issue. Hopefully, the new Consumer Financial Protection Bureau will study arbitration clauses and then ban them from credit card agreements. If anybody believes a consumer has a real chance of winning in arbitration in a dispute with a large corporation, including a big bank, they have never been involved in such a dispute.
The reality is a person who needs a credit card really has no real choice on the arbitration issue because all credit card companies are including arbitration clauses in their agreements. Where would that person go to get a credit card if he or she refused to sign an agreement containing an arbitration clause? Unfortunately, few folks even read the fine print when asking for a card. This decision by the High Court was very bad for consumers.
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.