Mandatory Credit Card Arbitration
Mandatory Credit Card Arbitration Fine Print
Mandatory Credit Card Arbitration of any claim a consumer may have against the issuer of the card is required by the contract the consumer entered into. This contract containing mandatory credit card arbitration was drawn up by the issuer of the card. It is reasonable to expect that the terms will be favorable to the credit card issuer. After all…if the applicant wants the card he has no choice but to agree to the terms. The arbitration process is unreasonably biased toward the lender. The lender writes the clauses. The lender can come after the consumer in court. Consumers must agree to private arbitration instead of direct legal action. This imbalance of power is about to change.
The CFPB has announced that reforms are imminent in the summer of 2016. The exact outlines of the new rules are not yet published but there is a definite upheaval in power back to the consumer in the event of legal disputes. It will be much higher in the near future for banks and credit card companies to hide behind these arbitration clauses. I will publish further updates as soon as the information is made public.
Consumer Financial Protection Bureau Skeptical of Mandatory Credit Card Arbitration
The CFPB is issuing new regulations restricting the implementation of mandatory credit card arbitration. Most consumers don’t even know they are agreeing to mandatory credit card arbitration. The secrecy of these arbitration proceedings is in direct contrast to the public exposure a lawsuit brings. This lack of a public record in the arbitration procedure keeps other consumers in the dark who may have the same problem.
Lenders claim their savings in legal fees that would be spent defending numerous frivolous lawsuits are passed on to the consumers. I’d be surprised if the CFPB buys into the line of thinking that strict arbitration clauses are there for the benefit of the consumer. The lender and the consumer pay the same for expenses of the arbitration process. The lender is always the one with the deep pockets. A typical arbitration clause requires the consumer to pay not only the arbitrator of his choosing but also 1/2 the fee of the “umpire.” The umpire is the third arbitrator chosen by the consumer’s arbitrator and the credit card issuer’s arbitrator. Your rights and benefits guide will contain language substantially similar to the following:
“The decision of a majority of the arbitrators will determine the outcome of the arbitration and the decision of the arbitrators shall be final and binding and cannot be reviewed or changed by, or appealed to, a court of law.”