JPMorgan Chase Eliminates Mandatory Arbitration in Credit Card Contracts
American Banker reports that JPMorgan Chase & Co. has agreed to eliminate mandatory arbitration clauses in its credit card contracts . Bank of America made a similar decision in August 2009. The scraping of mandatory arbitration clauses followed last summer's settlement between National Arbitration Forum and the Minnesota attorney general, which included NAF's agreement that it would stop handling consumer disputes. The American Arbitration Association made a similar decision shortly thereafter.
The JPMorgan decision preceded an announcement by Berger & Montague P.C.that it had agreed to drop a class-action suit alleging that JPMorgan Chase and other issuers of "unlawfully conspired to require their cardholders to arbitrate disputes." Under the terms of the settlement, JPMorgan Chase will eliminate its arbitration clause for three-and-a-half years, will not discuss arbitration with other issuers and will cover attorney's fees for the plaintiffs.
Mandatory arbitration provisions have long been a source of tension between credit providers and consumer advocates. Creditors have for many years used arbitration to resolve consumer claims, arguing that arbitration provides a cost-effective and expeditious method to resolve disputes. Consumer groups, on the other hand, have criticized the arbitration process, including charging that the arbitration groups managing the arbitration process have a pro-industry bias.
