In many cases, credit card owners aren’t even aware that they are agreeing to have all of their disputes settled by an arbitrator when they activate a new card. This means that, if you have reason to believe that you were charged incorrectly, you may be dealing with an arbitrator rather than a judge.
This issue has gotten the attention of members Congress. In fact, new legislation has been introduced that would prohibit adding this clause to consumer agreements. Rather, credit cardholders will have the option to choose between arbitration or having their case heard in court.
Although arbitration can be a good way to settle a debt, to mandate this as the means for settling the debt is inherently unfair to the cardholder. In addition, many cardholders fail to realize that they have agreed to the arbitration when they activate their cards. Since most cardholders are unaware of how to negotiate their contracts, they get held into this agreement. Since arbitrations are not open to the public in the way that court cases are, many consumers are also less likely to respond to an arbitration notice because they don’t understand the gravity of the situation.
The fact that the arbitrator is brought to the table vis-a-vis the card issuers themselves, it also puts the cardholder at a disadvantage. Credit card companies are potentially repeat customers that can bring in a substantial amount of money, the arbitrator is obviously going to do as much as he can to please the credit card company or the collections agency it works for.
Of course, the arbitrators claim that everything is on the up and up and that they do not have a policy of ruling in favor of the businesses. In addition, they claim that it is all fair because the decision has to be approved by a judge.
While this sounds good on the surface, there are many that can tell stories of how it isn’t quite so fair in reality. In fact, two former arbitrators that worked with a major arbitration company told one reporter that they were taken off of cases after ruling in a manner that was unfavorable to the institution. Similarly, one West Virginia Supreme Court judge said he no longer received cases after refusing to approve one decision. In addition, one former arbitrator and Harvard law professor stated that she was repeatedly taken off of cases after she had decided against a credit card company.
So, if you are facing arbitration, be certain to learn about your rights and to exercise them to the fullest extent possible in order to avoid being taken advantage of.
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