The Decline in Credit Card Arbitration

Today I received my monthly bill from one of my credit card companies with enclosed notices, including a notice of  amendments to the credit card agreement.  The first revision states:

Arbitration will no longer be used to resolve new disputes arising under your Agreement, or any claim or dispute related to benefits or services provided  in connection with this account.  As a result, we are amending your Agreeement to remove the section titled “Arbitration and Litigation” and to remove references to Arbitration and Litigation in the sections titled “When We May Require Immediate Repayment and Benefits.

Although the Supreme Court continues to improve the pro-business atmosphere for commercial arbitration (to wit, its Rent-A-Center West decision that Sarah Cole blogged about earlier today), credit card companies are backing away from mandatory arbitration, as I have heard about several other large credit card companies revising their customer agreements in a similar manner.  What is fueling this trend?  Is it the threatened Congressional backlash against consumer arbitration, or the nuisance value of persistent challenges to adhesive arbitration clauses in the lower courts?  Or, is it that credit card companies are discovering that arbitration is not the desirable alternative dispute resolution mechanism they once perceived?  I certainly don’t know the answer, but would love to find out from the decision-makers. 

JG

4 thoughts on “The Decline in Credit Card Arbitration”

  1. Four of the major credit card issuers (Bank of America, Capital One, Chase and HSBC) have settled an antitrust suit against them by agreeing to remove arbitration clauses from their cardholder agreements for three-and-a-half years. See http://arbitration.ccfsettlement.com/. This is a different lawsuit from the one cited in the previous comment.

  2. At least some of the change came about, I think, because of a lawsuit filed against the National Arbitration Forum by the Minnesota Attorney General. The lawsuit alleged that NAF deceptively concealed its financial ties to the credit card industry, and that those ties (and the procedures NAF used in mediating credit card disputes) were fundamentally biased toward the card issuers. The NAF, as I recall, severed its ties to the credit card issuers and discontinued arbitration of credit card disputes in an attempt to make the lawsuit go away.

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