Chase and other banks ending arbitration to settle disputes…
JPMorgan Chase, the largest issuer of credit cards, will stop using arbitration to settle disputes, a long standing practice that some legal experts considered biased against cardholders, three months after a similar move by Bank of America. The arbitration clause will be dropped for at least 3 ½ years, starting in 2010, following an agreed upon court case. The company stopped sending credit card disputes to arbitration in July.
The case stems from the use of mandatory arbitration by credit-card issuers to resolve payment disputes. Customers had to waive their right to go to court and agree to arbitration in advance to open an account. Critics of the process say it hurts consumers who do not realize that they are waiving their right to sue when they accept card services. On the other hand, supporters of arbitration believe the process is faster and cheaper than going to court, which could result in extra expenses that could be passed on to consumers.
The settlement comes on the heels of a congressional report that found that consumers were misled and lost almost every case, according to the American Arbitration Association.
The company that handled the arbitrations, the National Arbitration Forum, hid ties to collection firms. The National Arbitration Forum settled their lawsuit with the Minnesota Attorney General and are barred from taking any new consumer debt collection disputes.
The new Chase policy “is the right thing for our customers and our business and reflects our commitment to clearer and simpler communication with our customers,” according to JPMorgan spokesman Paul Hartwick. They won’t replace the clause with any other language, such as a class-action waiver, in card member agreements that will be sent in the first quarter of 2010, according to Hartwick.
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