Credit card arbitration: banks are conspiring against you

That the major credit card issuing banks are conspiring against consumers to force them into mandatory arbitration should come as no surprise to anybody. Why wouldn’t they force people into a system so stacked in favor of the credit card companies that the companies win all but 0.16% of the time. (For the math challenged like myself, that means that of 18,075 cases brought before the National Arbitration Forum arbitrators in California from January 2003 to March 2007, a total of 30 resulted in victories for consumers.)

What might surprise many of us cynics practicing consumer law, is that a court recognized this possibility, and it was a Federal Court of Appeals no less.

In a class action against just about every major bank that issues credit cards, the credit cardholders alleged that the banks with other co-conspirators, like American Express Co illegally colluded to force the cardholders to accept mandatory arbitration clauses in their cardholder agreements by refusing to issue cards to individuals who did not agree to arbitration in violation of the Sherman
Antitrust Act

A lower court had sided with the banks and dismissed the case, saying the cardholders lacked standing because they were really just speculating that they may be hurt in the future, but the 2nd Circuit Court of Appeal disagreed. In its opinion, the court held that the cardholders have adequately alleged antitrust violation and injuries “as a result of an illegal conspiracy and group boycott, the cardholders have been subjected to suppressed competition and ‘deprived of any meaningful choice on a critical term and condition of their general purpose card accounts,” as well as “reduced choice and diminished quality of credit card services.” While this isn’t a decision on any of the merits and is a long way from victory, it is a heck of start.

Now if we can just get Supreme Court that is more interested in people than corporations, we might get somewhere.