December 25, 2009
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Arbitration becoming a thing of the past, Pt.2
Lawsuits and legislation.Although credit card reform legislation does not prohibit lenders from implementing the arbitration requirement, the method by which they were conducting it was questionable. The process is being scrutinized in court proceedings whereby consumers have filed class action suits against credit card companies claiming arbitration clauses which force consumers into a corner and take away their rights to justice in the courts. Furthermore, consumer advocates say arbitration firms are not capable of being fair because they are hired by the credit card companies. On the other hand, credit card companies say arbitration is fair and swift and prevents an already congested court system from further backlog.
White House officials support credit card consumers on the issue and have been working to gather support of legislation that would ban lenders from mandating arbitration. Meanwhile the fight continues between lenders and attorneys representing consumers in court. Plaintiff attorneys say that although the fight is ongoing, they have won some victories as more and more credit card companies voluntarily drop arbitration clauses and expect soon all such clauses will become prohibited.
Despite the lack of address of the arbitration clause by new card legislation, new proposed legislation that would create a Consumer Finance Protection Agency which would be given the power to oversee arbitration activities and provide greater protection for consumers. The Wall Street Reform and Consumer Protection Act of 2009 has already been passed by the House but has yet to meet approval of the Senate. Proposed by President Barack Obama, the new law would also oversee the activities of debit and credit cards, gift cards, third party collection agencies, credit reporting agencies, credit counseling, debt settlement negotiations, and data security just to name a few. The bill would be the comprehensive and extensive law in history and would regulate every financial activity in existence. If finalized, it will certainly be the biggest victory of all for consumer advocates.