Credit Card Companies Continue To Be Protected From Lawsuits

Starting Thursday, credit card consumers will receive new protections against unscrupulous credit card practices. Credit card holders will have the opportunity to opt-out of interest rate rises. Consumers will also receive 45 days notice before an interest rate increase. As these new guidelines are meant to offer protections for consumers, an important protection will still be unavailable – the right to take your credit card company to court.

Each time you sign on the dotted line, you could be signing away your rights. Nearly every bank, credit card and cell phone company is a party. Many home builders, nursing homes, and some employers are too.

Written into the fine print, contracts often notify the consumer that arbitration is the permissible recourse. That means, you have no right to sue or file a class action lawsuit.

David Arkish, Director Public Citizen’s Congress Watch Division, says arbitration works in business‘ favor. “Lenders use arbitration as both a shield and a sword.” Arkish said. “The sword component is it makes it much easier to go after consumers.” Arkish said the shield is to “protect the company from liability.”

Arbitration goes through a for-profit third-party. It has no structured format and the case is never heard before a jury of one’s peers.

Jordan Fogel of Houston, Texas bought what she thought was her dream retirement home, until her first night the roof of the kitchen fell. “I was downstairs putting up glasses and all of a sudden the whole ceiling caves in and 100 gallons of water come crashing down,” Fogel said.

After twenty-nine months of fighting with the home builder, the only thing she realized was that her home was so contaminated with mold that no person should be allowed to spend one day inside.

When the home builder took her to arbitration, she soon realized she had no legal recourse in court.

“When the builder calls and says we will take care of you in arbitration, you know it’s not going to be in your best interest,” Fogel said.

On an uninhabitable $369,000 home, the Fogels won $40,000, but most of the money went back to the home builder because the arbitrator determined the Fogels violated contracts. Arbitration left the Fogels with a $10,000 reward.

Recent actions are showing that some businesses and the government are looking differently at arbitration.

Just Last month, the Minnesota Attorney General found that one of the largest arbitration companies, National Arbitration Forum, was so closely tied to its business clients, that the consumer had little chance of ever seeking a just reward. The determination was so stinging that the National Arbitration Forum immediately closed down.

Last week, Bank of America, said it will no longer enforce its mandatory arbitration clause in future disputes for most of its consumer businesses. Betty Reiss, spokesperson for Bank of America, said the decision was made because of “complaints from customers.”

David Arkish with Public Citizen said the Minnesota decision and the voluntary action by Bank of America is good news for consumers, but there is still little protection because Bank of America could reverse this decision at anytime.

“If they do the right thing today, they’re not stopped from changing their mind later. The problem is the power is all in their hands. They have the power, unilaterally, to take peoples’ right to go to court away,” Arkish said.

Bryan Quigly, spokesperson with the US Chamber of Commerce Institute of Legal Reform Institute, said arbitration works and voluntary arbitration will not.

“There’s this myth out there you can take arbitration and have it as an option. But both parties would have to agree. So when you already have a dispute on the table, one of the parties will agree which path is better for them,” Quigly said.

A Congressional proposal, backed by President Obama, would prohibit mandatory arbitration for bank and credit card consumers, which would instate consumers’ right to the courts. Consumer advocates want the proposal expanded to all sectors of the economy – homes, cars, cell phones, nursing homes, and the workplace.