Consumer watchdog agency weighs lost credit cardholder rights


WEST SENECA, N.Y. (WIVB) – Would you be willing to give up some of your rights to get a credit card, a debit card, or a car loan? Chances are you already have: It’s in the fine print of your credit agreement.

When consumers sign up for a credit card, or just about any other consumer contract, buried in the fine print is a clause for settling disputes which only allows arbitration. Agreeing to binding arbitration means giving up the right to sue.

If the retailer, or bank, decides to arbitrate and the outcome is not to your satisfaction, the consumer has given up the right to litigate the dispute in court, or have a jury trial–even if someone else has filed a class action lawsuit against the same business.

Scott Laughlin, the Vice President of Consumer Credit Counseling Service of Buffalo also points out, arbitration rulings don’t have to be consistent, either.

Laughlin cited a situation where two people could arbitrate the same error with the same company, “One person could be getting great benefits because of the accident that had occurred with their account, while another person got a $5 gift card for a local coffee place.”

A little known government agency called the Consumer Financial Protection Bureau (CFPB) is working on regulations that would severely restrict forced arbitration clauses in consumer contracts.

While the financial services industry contends arbitration is faster and cheaper for consumers, the outcomes are not always fair. Laughlin believes if consumers have the option of suing, banks might be more amenable to settling disputes fairly.

“Whether it is a bank or just a credit card company, it will be better that the individuals will be able to work together when there are some things that just aren’t going the way they should be going.”

Laughlin contends, restricting the use of arbitration clauses is a way of leveling the playing field for consumers, while consumers would still have the option of arbitration for their individual claim.

“Work together to resolve some of the issues that they might be having that are more collective, rather than just specific to one person’s account–that is when arbitration might be most helpful, when it is just one.”

A report from the CFPB, earlier this year, showed more than three-out-of-four consumers didn’t know whether their credit card agreements required arbitration.

Less than 7% who had arbitration clauses did not know it restricted their ability to file lawsuits.

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