Ebook Hearing on: the Federal Arbitration Act: Is the Credit Card Industry Using it to Quash Legal Claims?
The Federal Arbitration Act was intended to provide an informal dispute resolution mechanism for businesses to resolve disagreements. At the time, arbitration was voluntary, chosen by sophisticated parties that had bargaining power with respect to each other. In the early 1980s, the United States Supreme Court opened the door for large corporations to force their customers and non-union employees into arbitration, and many have seized the opportunity.
Today, a consumer must forego the right to litigate any future disputes in court to obtain a wide range of goods and services, including credit cards. A consumer with a credit-card dispute must bring a claim individually, not as a member of a class, in a private, secretive forum, chosen by the credit card provider. The San Francisco City Attorney has called the leading arbitrator of credit card disputes, the National Arbitration Forum, an “arbitration mill” that “churn[s] out arbitration awards in favor of debt collectors.”
Forcing arbitration on credit card customers has nothing to do with providing them a quicker, simpler, less expensive forum in which to pursue disputes, as its proponents claim. Nor is there any evidence that forced arbitration provides consumers with cheaper credit. The real functions of forced arbitration are to deter consumers from bringing claims at all; and to give creditors a fast-track forum for collecting debts, even unlawful debts, in which they can run up additional fees to charge consumers. In short, forced arbitration is another in a long list of predatory credit card practices.
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