Chase becomes first bank to drop arbitration clause
Filed under: Credit, Debt, Credit Cards
JP Morgan Chase became the first bank to drop its arbitration clause from its credit card contracts, so Chase credit card holders will have the right to go to court to dispute a problem with its credit card decisions. This decision was part of a settlement of an antitrust lawsuit filed by Minnesota Attorney General Lori Swanson that involved the largest arbitration company, the National Arbitration Forum, in July. The Forum is no longer part of the process of consumer-debt arbitration, but the banks have not yet settled the suit. This move by Chase will likely encourage other banks to do the same thing.
While Bank of America became the first one to announce that it would no longer require credit card, bank account and auto loan customers to sign away their right to sue and force arbitration, it has not yet settled the existing lawsuit. Capital One Financial, HSBC Holdings and Discover Financial are among the other financial institutions named in the suit.Much of the case centers around alleged practices of the National Arbitration Forum, which was by far the largest of the companies that arbitrated credit card disputes. The suit alleges they masked their connections to collection firms, which won the vast majority of arbitration cases.
After Swanson sued the National Arbitration Forum because of its ties to the debt-collection industry and lack of disclosure -- which violated Minnesota laws against consumer fraud, deceptive trade practices and false advertising -- NAF caved. It quickly settled the case and agreed to stop taking new consumer-debt cases in July as part of the settlement.
One of the ties questioned by Swanson was the fact that the NAF "is financially affiliated with a New York hedge fund group that owns one of the country's major debt-collection agencies," according to the lawsuit filed.
The second major arbitration firm, American Arbitration Association, saw the writing on the wall and decided not to wait until it got sued. The company stopped participating in consumer debt-collection disputes in July as well.
This will be a big win for consumers. Companies prevail over consumers in 94 percent of the cases that go into arbitration. The NAF processed 214,000 consumer-debt obligation claims in 2006. It oversees 1,000 attorneys and former judges who handle the cases.
Now that Chase has settled, it's only a matter of time before the others decide to settle as well. Consumers everywhere may soon have the right to go to court if they have a problem with their credit card company.
Lita Epstein has written more than 25 books including "The Complete Idiot's Guide to Improving Your Credit Score."
Reader Comments (Page 1 of 5)
11-23-2009 @ 5:39PM
Alessandro Machi said...
The reason the arbitration clause story is not new is because I requested arbitration for my account and was denied several months ago.
Maybe it took Chase Bank this long to enact the policy, but compared to what is going on elsewhere within that company, this is a magicians trick type of press release designed to make us look somewhere other than where we should be looking.
Parallel Foreclosure IS THE TOPIC that far outweighs dropping arbitration.
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11-26-2009 @ 6:17AM
Ken Siemers Sr. said...
This decision is incredibly obvious. It makes card holders think the bank is more honest when in reality, they have determined that it will be cheaper to pay off those who complain and reap the benifits from those who don't. It's just plain sad how the ethics of our business community have declined. They are no more than criminals who we should fear as much as any other criminal.
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11-26-2009 @ 6:41AM
james russell said...
As a small business owner, and after the houseing bust, all of my credit cards are far behind. Haveing signed up for credit insurance protection for my discover card, its a joke. I've paid for it over a period of 6 years, and haveing ask to apply it while i was out of work, it did absolutely no good at all. The people have nothing to protect them. I advise everyone to stop paying for protection for their cards, my experiance says you don't have a chance.
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11-26-2009 @ 8:07AM
Mark said...
Why deal with these companys at all. Learn to handel your own money, and have a debt card with a few hundred bucks on the side just in case. You really have to learn to be independant of these credit companys, and don't let anyone tell you, you have to have a credit card to make it in this world, it's a lie just ask anyone over the age of fifty how they did it back in the old days
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11-26-2009 @ 8:29AM
Chendri said...
Sounds like their trying to make there selfs look good,Ya
right,Have a family member who lost their job and Chase
wont even work with them on their mortage so now they
are about to lose their house,Said it was because they
didnt have a job!,Geez what a joke.
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11-26-2009 @ 8:33AM
dblan2155 said...
Allesandro, can you please explain parallel foreclosure. Thank you.
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12-01-2009 @ 8:09AM
Alessandro Machi said...
When a consumer asks for a home loan modification, they probably will be put at the end of a very long line unless they fall behind on their payments.
The moment they fall behind on their payments, the banks may begin foreclosure paperwork on their home.
Where it gets really weird is, even if the bank is negotiating face to face with the homeowner about a home loan modification, the "parallel foreclosure" paperwork continues to be filed and moved along in another department.
The homeowner could find themselves in complete compliance with the home loan modification process and still have their home foreclosed upon!
More shocking still, an ARMED LAW ENFORCEMENT OFFICER could show up to evict the homeowner WITHOUT A JUDGE EVERY REVIEWING THE PAPERS OR THE FILE!
We're talking a law enforcement officer using force if necessary to remove a homeowner based on the word of the bank, and not a judge.
11-26-2009 @ 8:38AM
JILL said...
I HATE CHASE BANK..THEY ARE THEY WORST!!!!!!!!!!!
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11-26-2009 @ 8:50AM
uncle buck said...
CHASE is a gang of theives, and once again, Congress gave them plenty of time revise their scams. CHASE raised my credit card rate to 28% to get in before so-called "credit reform" took effect. When I called to complain, some lady from halfway around the world told me "It in contract" (note the improper English). Outsourcing jobs and screwing you while they still can, ALL with the hand wringing of Congress,,,Democrat and Republican.
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11-27-2009 @ 11:26PM
Robert said...
I cut up and cancelled my credit cards with shell and phillips 66 because the cards where backed by citibank. Join a credit union and get your credit cards thru them if you cannot afford the new interest rates. Credit Unions tend to be alot cheaper because they generally are owned usually by the account holders.
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11-26-2009 @ 9:00AM
james said...
Sadly,the arbitration was buried in the fine print and most folks do not realize it was ever signed away
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11-26-2009 @ 9:11AM
Rick said...
I've had a Chase card forever, never been late with a payment, never had any problems at all with my credit. I pay off the charge's on the card each month. Matter of fact, my credit score is 870, yet they raised my intersest rate from 8% to 14% last month. But what can you do? If you cancel the account, the next time you want to get a loan, your lender will use it against you, you'll get the loan, but at a higher interest rate, guaranteed, so basically, we're all just screwed.
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11-26-2009 @ 11:54AM
Tom said...
Credit card companies are using a clause in the fine print of your "contract" with them (credit companies know that most don't read the fine print of course) to enact "Universal Default". Even if you've always paid them on time, have a long term relationship, etc...they can raise your apr % to higher amts. just by checking your credit ratings and seeing if you've ever been late to ANYONE and it was reported. Universal Default - another way they screw you. If you don't opt out, your outstanding balance is now charged at the higher apr finance rate. BEWARE!
11-26-2009 @ 9:12AM
ort said...
My Mastercard rates got jacked up to 29.99% and I don't have a balance on any of them. I was also told that I would be charged a $140 fee for NOT using the card, each year. What?????? GE Moneybank has also jacked the rates up to 29.99%. If I buy anything now, I will pay cash or only go for the zero interest if paid in a year deals.
I saw on Suze Orman's show that if I cancel a card and sign up for another one immediately (through my credit union), it would not affect my FICO score negatively. I think that's what I'm going to do.
It's amazing how credit card companies can do things that would have me put in jail. If I charged somebody 29.99% on a loan I made them, it would be illegal. But they can do it? This country is rotten to the core and so are its business practices.
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11-26-2009 @ 9:21AM
Steve said...
With the Fed rate near zero, why are credit cards at 28% ?
Because,Congress likes banks better then consumers. When Consumers have lobbyests that give money to Congressman, maybe the interest rate will come down. It makes no sense for the consumer to spend money on credit cards, the interest rate is like juice.
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11-26-2009 @ 9:35AM
Slick50 said...
If they arranged comments in reverse order, most of the spam would be buried at the bottom of every story.
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11-26-2009 @ 9:38AM
Holly said...
All the banks are increasing interest rates before the new credit card laws go into effect. When these news laws were passed,it gave the banks plenty of time to skirt them---which shows that government cares more about the banks than the consumers. Banks received billions of dollars in bailout money so that interest rates could go down, but instead they are higher than ever----yet, interest on bank investments is at an all-time low, so go figure that one out. It won't be long before China owns America---we will have to declare bankruptcy with the unemployment rates, foreclosures and debt. This has not happened since Obama took office, either----this has been many years in the making, and you can thank George Bush for TRIPLING the national debt in 8 years, now we are trying to compensate for that. How much more in taxes can we possibly pay? The answer is to institute a flat sales tax, so that NOBODY is exempt, and pays equally---so if you want to buy a $100,000 Mercedes or a $20,000 Honda, you pay the same percentage in sales tax----18% or 20%, and that's fair because it treats everybody equally!! This way, the wealthy can't write-off income taxes and come up with "charities" to be free from taxes. Whatever you buy, you pay the same percentage of taxes---so if you buy more, you pay more, if you buy less, you pay less, it's as simple as that!! Eradicate income taxes and insititute flat sales taxes and treat everyone equally!!
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11-26-2009 @ 9:38AM
EDDIE NIGGEBRUGGE said...
THANK YOU AGAIN TO EXPRESS MY OPINION I THINK THIS HAS
BEEN A GROSS VIOLATION OF OUR LAWS HERE IN U.S.A.
TO ME THIS IS LIKE LOAN SHARKING FROM THE PAST
SO LONG EDDIE
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11-26-2009 @ 9:45AM
Old Man Tom said...
Altho I have never been late with a payment on my Chase card,they raised the intrest in Sept. to 28%. just received notice they will not renew my card. I wonder if this will hurt my credit.
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11-26-2009 @ 9:44AM
suzyteaser said...
As it relates to those of you with great credit, who's never been last on credit cards and your interest rate was raise, here's what I did. I went on the financial pages and found Barclay Bank's headquarter office. You know the location where the CEO of the company is located. I wrote a letter to the CEO of Barclay and explained that I hadn't been late with my credit and how I felt the company needed to show loyalty to those customers who have paid on time. For the next two months, I paid my credit on the day after the knew minimum balance was calculated. This allowed them to make little interest off of my balance. They dropped my credit card down from the increased rate of 29.99% to 3.99%. Stop complaining and do something to invoke change.
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