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Consumers Lose in Dispute over Credit Card Arbitration Clauses

Saturday, December, 5, 2015

Consumers recently lost begin when a federal appeals court rejected claims that credit card issues colluded to require disputes between lends and consumers be settled through arbitration rather than class action suits. The ruling comes as mandatory arbitration clauses have received a great deal of attention in recent news.


The US Circuit Court of Appeals in New York ruled 3-0 that the lower court’s ruling that American Express, Citigroup Inc., and Discover Financial Services violated the Sherman antitrust law by forcing cardholders to participate in arbitration should stand.


Credit card holders argued the lenders and their attorneys acted illegally when they held nearly 30 meetings between 1999 and 2003 to discuss how to impose mandatory arbitration clauses. US District Judge William Pauley ruled in April 2014 following a five-week trial that consumers had not shown collusion, but only by a “slender reed.” He did state there was conscious parallel action among the banks, but not enough to find in favor of consumers.


The district court determined the final decision was not clearly erroneous and that the conclusion was “… plausible in light of the record viewed in its entirety.”


An attorney for the consumer group said his clients disagree with the decision, but are not yet sure if they will appeal. The credit card companies had no public statement in response to the ruling.


Arbitration clauses are growing more and more popular in consumer contracts, and are under a great deal of spotlight. Many view these clauses as unfair to consumers because it removes their power to take much legal action if they are treated unfairly or believe a company breaks the law.