High Profile Suit Brings Eight Credit Card Issuers under Fire, Alleges Arbitration Conspiracy

By Rebecca Lindsey, CardRatings.com Senior Staff Writer


A lawsuit filed in New York federal court alleges that eight banks named in the suit conspired to impose arbitration agreements upon their credit card holders.

Filed in early August on behalf of seven plaintiffs from across the United States, the suit alleges that some of the banks named convened a group called the “Arbitration Coalition” or “Arbitration Group.”   It further claims that bank representatives spoke or met at least 20 times between 1999 to 2003 to share experiences and advice on setting up arbitration agreements that would withstand challenges in court.

Arbitration clauses are included in the terms and conditions of credit card agreements by many of the largest banks in the United States.   Mandatory arbitration limits the card holder’s ability to take legal action if a dispute should rise; instead, any issues (such as those regarding identity theft, fines, penalty or late fee disputes, interest rate guarantees, etc.) must be settled in a private arbitration hearing.   Many card holders are unaware that they’ve entered into such an agreement.

Paul Bland, an attorney with Trial Lawyers for Public Justice, a national public interest law firm, says:

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“Few consumers read and understand all of the terms and conditions of the credit cards that they use.   Therefore, not enough consumers are in the know about binding arbitration to produce a public outcry.”

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The suit is seeking class-action status, citing that under the federal antitrust law, it is illegal for major competitors in a given industry to secretly conspire or collude to restrict trade or commerce.
Bland continues:

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“I don’t know if they violated the antitrust laws or made any illegal ‘agreement,’ but one way or another, it is clear that nearly all the large banks in America have adopted binding mandatory arbitration clauses that ban class actions.   Whatever happens in this new lawsuit, I hope that it encourages more of a national debate as to whether it is wise for the largest banks to be able to completely insulate themselves from legal accountability."

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Banks named in the suit include: Bank of America, Capital One Financial Corporation, J.P. Morgan Chase Co., Morgan Stanley's Discover Unit, Citigroup Inc., MBNA Corporation, Providian Financial Corporation, and Britain’s HSBC Holding Plc.

Please view our article entitled Credit Card Binding Arbitration: When Ignorance Isn’t Bliss for more information about this topic.

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