December 25, 2009
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Arbitration becoming a thing of the past, Pt.1
In the heat of controversy.Just a few short months ago, if consumers had a beef with their credit card company over the card balance, terms and conditions of the credit contract required that they use arbitration as the means to reach an agreement. However, it was discovered earlier this year that several arbitration firms were maintaining a conflict of interest as they represented the credit card holder while maintaining a business relationship with the lender. The card's contract arbitration provision caused a great deal of controversy as consumers and credit card companies argued over the pros and cons of the process and prevented Americans from seeking settlement in the courts.
When authorities became aware of these dual roles on the part of the arbitration firms, they immediately took measures to cut off these firms from participating in negotiations between Americans and credit card companies. The action left lenders no alternative but to begin eliminating the provision. Leaders in the industry JPMorgan & Chase, Bank of America, and Capital One have all dropped the arbitration requirement and have begun training personnel in negotiation skills. Credit card companies are hoping the new strategy to maintain corporate customer service personnel for this purpose will prevent seeking out the courts to settle; a process that is both time consuming and costly.
While many of the nation's credit card companies still have the arbitration clause in the card's terms and conditions, it is expected that most will eliminate it with new paperwork being released to meet the conditions of new card reform legislation that will be enacted on February 22, 2010. However, some lenders have not given up on utilizing outside arbitration firms. These lenders have a lot to say in support of the practice and consumers maintain it's an unfair process that only benefits lenders. Continue on to learn about the pros and cons of arbitration.