July 22, 2009
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News: American Arbitration Ceases CC Negotiations
The American Arbitration Association announced July 21st that it will cease to do business in consumer debt arbitration with credit card and cell phone companies. The announcement comes just a few days after the National Arbitration Forum (NAF) reached an agreement with Minnesota's Attorney General Swanson, which requires the company to cease accepting consumer arbitration cases, including those pertaining to consumer healthcare debt, telecommunications, utilities, mortgages, and leases. American Arbitration says rules and guidelines that regulate arbitration in the credit card and cell phone business is too vague and they will remain out of the business until guidelines have been clarified. According to the terms of most major credit card companies, lender must use arbitration and not the court system to settle disputes.
A great deal of controversy has surrounded the arbitration business for a number of years. Advocates say the business is deceptive in that it doesn't fully inform credit card consumers of their legal rights. Typically, once individuals sign a contract with one of these companies, they wave their rights to sue in a court of law. It is also argued that arbitration favors credit card companies over individuals. It just keeps going on and on for both sides of the fence. Lenders are predicting higher losses in 2010 because of the new rules that will limit their ability to raise interest rates and charge fees. Consumers on the other hand, need relief from a rising cost of living and increasing unemployment.
Washington has also become interested in the business of credit card debt and cell phone arbitration. A subcommittee will soon be hearing testimony on the topic and President Barack Obama has also raised the question in regulatory reform talks. One of the clauses in the President's proposed Consumer Finance Protection Agency calls for an investigation into whether or not contracts that require arbitration are fair and effective.