November 6, 2006
Fine Print of Credit Card Agreements May Contain Terms Not in Your Best Interest
Professor Elizabeth Warren has written a revealing article on the Credit Slips blog about arbitration clauses in credit card agreements. It seems that many credit card agreements contain provisions that require arbitration in the event of any lawsuit by a consumer. Further, the credit card user agreements often contain a waiver of the consumer's right to participate in a class action.
It turns out that the credit card companies have manipulated the system by choosing only arbitrators who rule their favor. Arbitrators who ruled against the credit card company were not chosen for any cases.
The class action waiver provision greatly benefits the credit card issuer by creating a barrier to a special kind of lawsuit known as a "class action." Class actions are usually put together by lawyers who have identified improper activity by a defendant that has affected thousands or millions of plaintiffs. Since each individual plaintiff may have only suffered a small amount of damages (perhaps only a few hundred dollars each), it is unlikely and impractical for these consumer plaintiffs to file an individual lawsuit.
I suspect that someone will challenge these waivers as being unenforceable. However, if the courts agree with the credit card issuer and stop class actions from going forward, then there is no practical restraint upon overreaching behavior by credit card issuers.
In the meantime, be aware that the fine print in those credit card applications may contain language that can negatively impact your interests.
Filed under Consumer protection by Jonathan
Comments on Fine Print of Credit Card Agreements May Contain Terms Not in Your Best Interest »
Is this any surprise ?? I believe MBNA started the nonsense of arbitration clauses in credit card agreements and they have subsequently used arbitration very aggressively on customers who default on their cards. 99% of the time the consumer will lose, it's a kangaroo court and most consumers have absolutely NO chance of prevailing unless they have the money to hire a lawyer. Arbitration awards are issued on out-of-statute debts that are then trotted down to local courthouses and confirmed into judgments.. one that might not have ever been granted in a court of law based on the affirmative defense of the expiration of the statute of limitations on the debt.
We, the consumers, have known that these arbitrations are in no way fair, certainly NOT "impartial", and absolutely not less costly than a regular lawsuit since the consumer winds up footing the entire cost of the arbitration plus the court costs when the creditor goes and gets the award confirmed as a judgment. There have been cases where these arbitration clauses have been deemed unconscionable and unenforceable yet they have not gotten any real exposure until now. We can only hope that more of this comes to light and these arbitrations, which are a JOKE, will end.