Arbitration clauses in credit card agreements

Minnesota consumers who are facing overwhelming debt may be interested in learning that there is an important provision that could be contained in many of their credit card and other financial agreements. These provisions may seriously impact their legal rights when it comes to disputes with their creditors.

Many consumers agree to the terms of their credit cards without actually reading the cardholder agreement in full. Data from one study shows that around 75 percent of cardholders are not even aware that the agreement exists. However, buried in that agreement is an arbitration clause that takes away a consumer's right to sue the credit card company either individually or as part of a class action lawsuit.

This arbitration clause, which only a reported 7 percent of cardholders are aware of, says that disputes with the company must go through arbitration. Arbitration is an alternative dispute resolution process that works outside of the court, allowing parties to go before a non-judicial arbitrator. The judgment of the arbitrator is binding on the parties. While those in the financial industry argue that this helps to lower costs, some studies show that the results of arbitration may be biased in favor of the creditors. Additionally, these clauses can prevent consumers from banding together in class actions against these financial companies. This takes away an important legal remedy that consumers can usually rely on.

In all, these mandatory arbitration requirements may cover up to 80 million consumers, most of who are not aware of it. In cases where a person is fighting against creditor harassment, they may affect their legal options. An attorney with experience in these matters can assist in determining the forms of relief that may be available

Source: credit.com, "Consumer Watchdog Says You Should Be Able to Sue Your Credit Card Company", Bob Sullivan, March 10, 2015

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