Court Upholds Binding Arbitration for Credit Cards

Written on January 22, 2012 – 9:08 am | by Adam Gomez

The U.S Supreme Court gave a blow to peoples hopes with upholding the binding credit card arbitration procedures.

These are the business-friendly procedures which deny customers to takes their complaints to the Court.

After a clear win by 8-1 votes, the jury reaffirmed that the federal laws permit credit card companies to enforce arbitration laws which have been practiced universally by the credit card companies and form the basis of millions of contracts.

The Supreme Courts ruling contradicts with the recent trends practiced by leading banks and credit card companies who dropped the arbitration agreements or decided not to enforce them in future. Some of the major banks involved in the decision included JPMorgan Chase, Bank of America and Capital One Financial Corp which came under high pressure from state officials.

This Supreme Court ruling was given on an appeal from CompuCredit Holdings Corp. of Atlanta which insisted that these arbitration laws do not allow the customers to go to the courts and federal law enforces these laws. However, defenders of arbitration clause say that it is a fairly efficient and economically wise process.

Critics, however, raise their voices in opposition to the arbitration laws as they are usually led against the customers because arbitrators are usually hired by lenders. A Citizen report by consumer rights organization stated that consumers lost almost 94% of the cases taken up by Bank of America which were arbitrated by the largest arbitration firm in the country.

Many of the critics speak aggressively against these laws. Merrill Davidoff, an attorney says,

Legally, we call these adhesion clauses, meaning you get it and you have to agree to it,

he also filed a case against several credit card issuers who unlawfully behaved against customers forcing them to use arbitrate disputes. He further says that

We consider them very overbearing, one-sided clauses that required consumers to bring disputes to arbitration and denied consumers the right to participate or institute class actions.

After the decision, mixed reactions have been seen on the customer side. One of the customer advocate stated that it is too early to assume the result of this decision. Some of the customers are not taking the decisions as wrong and they might start the arbitration process again.

But there are clear chances of customer advocates in federal government to join the anti-arbitration war, especially of the Consumer Financial customer Bureau which may bring a winning chance for customers over this issue.

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