You may be unaware of it but, whenever you signed up for a credit card, you also signed an agreement between you and your credit company giving them immunity from any lawsuit coming from you. The only way you could get any disagreements between you and your credit company to be settled would have been through an arbitration company.
Fortunately, it seems that arbitration as a settlement option is on the way out. Recently, Bank of America, one of the largest credit companies in the United States, announced that it will no longer require their credit card clients to give up their rights to a lawsuit and opt for arbitration instead. This move will expose Bank of America to lawsuits coming from their credit card holders and would, no doubt make their legal expenses go higher. So why the recent move?
Arbitration has recently been a hotbed of controversy in the past few months. In fact, this recent decision of Bank of America follows the announcement of the National Arbitration Forum in July that they were going to stop hearing mandatory arbitration cases from consumers. The National Arbitration Forum's move was also prompted by a lawsuit filed against them by the Attorney General of the Minnesota, claiming that the National Arbitration Forum was hiding its ties to the debt collection industry. The National Arbitration Forum settled.
Following the capitulation of the National Arbitration Forum, the American Arbitration Association also released an announcement that it would stop its debt collection arbitration cases pending the overhaul of its existing guidelines. Notably, JP Morgan Chase also announced in July that it would stop submitting disputes with credit card holding customers to arbitration. Currently, other credit card companies such as American Express are contemplating following suite with JP Morgan Chase and Bank of America.
This particular change in the way credit card companies are doing their business is very welcome among credit card holders. Although credit card companies were quick to point out that arbitration offered a fair avenue for dispute settlement to credit card holders, records show otherwise. It seems that credit card holders are usually on the losing end when they go into arbitration.
The move away from arbitration will give credit card holders more options when they have disputes with their credit card companies. Having the ability to raise lawsuits against their credit card companies, card holders will be more inclined to fight for their rights and protect themselves. The move will also give a boost to the Fairness Arbitration Act, a bill currently pending in Congress which will eliminate mandatory arbitration clauses.