November 25, 2009
-
News: JPMorgan Removes Arbitration Clause
Embedded in the fine print of credit card contracts is a clause stipulating disputes over the cards debt must be solved through arbitration. In the past, lenders have typically employed separate debt negotiation companies to facilitate negotiations between the credit card company and cardholder. Due to pressures from attorney generals across the nation and lawmakers that discovered a dual role on the part of the debt negotiation firms, these firms have been forced to exit the arbitration business. This recent action has placed credit card companies in a difficult situation since they do not have the resources currently available to personally conduct arbitration. Lenders have retreated back to the drawing table to develop plans and train staff to implement debt settlement negotiations directly with the consumer.
JPMorgan Chase & Co., the nation's largest credit card issuer, is the first major lender to remove the arbitration clause from their card contracts. The move is sparked by the company's desire to settle an antitrust lawsuit which involved several of the nation's largest credit card companies. The company is the first and only lender named in the suit that has agreed to the settlement by eliminating the arbitration clause for a minimum of 3 ½ years beginning in 2010. The case which involved JPMorgan, Capital One Financial Corp, Bank of America, Discover Financial, and several other lenders alleged that the companies violated antitrust laws by secretly collaborating to make arbitration an industry standard in settling debt disputes.
Credit card companies worked hand in hand with debt negotiation firms including National Arbitration Forum and American Arbitration and concealing their relationships with collection agencies from the consumer. Court records indicate that the collection agencies won the majority of the arbitration cases. Last year under the pressure of state attorney generals, both National Arbitration Forum and American Arbitration, the two major arbitration companies, exited the arbitration business. Most likely, other lenders will soon follow the JPMorgan's example and remove the arbitration clause from card contracts as well.