Most Credit Cards Still Deny Access to Justice with Forced Arbitration Clauses

An estimated 85% of all major credit cards continue to use forced arbitration clauses to deny customers access to justice, Public Citizen found in a report released today, and just two arbitration providers – the American Arbitration Association and JAMS – are the designated firms in most terms-of-service.

“Terms-of-service agreements are just edicts placed on unsuspecting consumers designed to ensure the future legal and financial victory for the credit card issuer,” said Martha Perez-Pedemonti, civil justice and consumer rights counsel for Public Citizen. “Credit card companies know that customers are unlikely to review their options until after a dispute arises because consumers simply lack the time and resources to deal with volumes of fine print.”

The report also found that although an estimated 76% of credit card terms of service agreements containing forced arbitration clauses include opt-out provisions, customers must overcome onerous requirements to use them, requirements buried deep in the lengthy and difficult to read fine print. Eleven of the 13 opt-out clauses Public Citizen examined required consumers to submit a “request to reject” letter and send it to a specific address via snail mail within 30, 45, or 60 days before their request can be approved. None of the contracts containing opt-out provisions specified whether or how customers might be notified if their opt-out was received and approved.

Arbitration firms are extrajudicial systems heavily influenced by corporations, where consumers are placed at a significant disadvantage. These firms lack the structure of state and federal courts, their proceedings are notoriously secretive, and arbitrators have an incentive to favor the companies that use their services over wronged customers. Private arbitration firms follow their own general arbitration rules and procedures, have their own filing and fee structures, and have their own standards for assigning arbitrators. Rules of evidence are established by the firm, and rulings are almost impossible to appeal. The arbitrators are not even required to have prior judicial experience.

Because there is no public right of access to arbitration proceedings, and federal law does not require decisions to be reported, it is nearly impossible to learn the substance of how arbitration firms adjudicate matters. This veil of secrecy deprives the public of potentially valuable information that might emerge during a trial, such as instances of safety hazards, fraud, and discrimination that may affect many consumers.