Consumers have the deck stacked
against them when they are forced into mandatory arbitration by their
credit card
issuer or other financial services provider, an analysis by the Center for
Responsible Lending confirms.
Many consumers don’t even know that the contracts they sign for most
credit cards,
auto loans and other small loan products come with hidden clauses that
require they
use arbitration rather than the courts if a complaint arises. A recent
poll shows
Americans believe they should have the right to pursue claims in court
if they
want.
The CRL analysis, “Stacked Deck,” details some of the forces working
against an
individual’s ability to receive a fair hearing during arbitration. Among
them:
* Individual arbitrators have a strong incentive to favor the firms that
provide
them with repeat business over an individual consumer they may never see
again.
* Companies win a favorable ruling in arbitration far more often than
consumers.
* Companies involved in the most arbitration cases–and therefore in
creating the
most business for arbitrators?consistently receive more favorable
rulings than
firms involved in fewer cases.
CRL recommends that, before signing a contract, borrowers read the fine
print, ask
questions and try to opt-out of arbitration clauses. And they should
keep in mind
that such clauses may not always be enforceable.
The report is available at:
http://www.responsiblelending.org/credit-cards/research-analysis/stacked_deck.pdf
About the Center for Responsible Lending
The Center for Responsible Lending is a nonprofit, nonpartisan research
and policy
organization dedicated to protecting homeownership and family wealth by
working to
eliminate abusive financial practices. CRL is affiliated with Self-Help,
one of the
nation’s largest community development financial institutions.
