JP Morgan Chase says “goodbye” to arbitration clause in card agreements

Jennifer McClelland | RSS | Mon, Nov 23 2009 | 0 Comments

JPMorgan Chase has decided to drop a clause from the credit card contracts that it has members sign when they sign up for cards. The clause is the highly disputed mandatory arbitration clause.

So, why exactly are arbitration agreements bad?

Arbitration can (and often does) give the company the ability to really mess you over in any kind of lawsuit. If you have a legal dispute with a company, you can’t take them to court…you take them to arbitration. Also, if you decide to take the company to arbitration, you will be forced to share the costs of the services with the company.

A group of people cannot form a class action lawsuit against a company that has a mandatory arbitration agreement in the contract.

Typically in arbitration, the company will be allowed to pick who the company is who provides the arbitrator.

The entire situation is meant to give consumers the short end of the stick in a lot of cases where large companies are involved.

However, now that Chase Card Services has decided to remove the mandatory clause from the contracts, it will open up the doors to things like class action lawsuits. Because of this, the company will likely be a bit more careful and scrupulous with its business actions.
The reason the banks had arbitration to begin with is because they claimed that it was more fair to the consumers because they were cheaper and took less time. When you look at the negatives that come from arbitration though, you can see that it often does not favor the consumer. In many cases, the odds are definitely against the person who wants to sue the company.

Chase isn’t the first company to take the clause out. Bank of America has done the same thing in the past few months. There are still plenty of businesses and corporations (and, yes, banks) that mandate arbitration. I believe that some banks will always require arbitration for mortgages.

Related posts:
What will the credit card companies do?
Wells Fargo wants to stand out and raise credit card rates

Tags: class action lawsuits, mandate, arbitration agreements