JPMorgan Chase, the country’s largest bank and biggest U.S. credit-card issuer, has reintroduced to over 40 million credit card holders a controversial policy that forces their customers to use arbitration instead of being able to go to court to resolve payment disputes or joining class-action suits. This new clause stipulates that any disputes between consumers and Chase must be brought up before a private arbitrator.
JPMorgan’s primary federal regulator, the OCC, considered this “a victory for consumers and small and midsize banks” that would help prevent “expensive frivolous lawsuits.” JPMorgan Chief Communications Officer, Trish Wexler, states that it “is often faster, less expensive, and provides better outcomes for our customers.” This clause still allows customers to bring cases against the bank on small claim courts as well.
Nevertheless, as addressed by Lauren Sanders, Associate Director at the National Consumer Law Center, these “forced arbitration clauses are a ‘Get Out of Jail Free’ card for companies that violate the law instead.”
Academic studies show that the mandatory arbitration is indeed a rigged system that is in favor of the businesses. Researchers found that companies, such as JPMorgan Chase, routinely pick arbitrators that are known to rule in favor of businesses for the fact that arbitrators know that the more they rule in favor of businesses, the greater chance they’ll be picked for future cases and earn future paychecks. These professional arbitrators, whose past rulings in favor of businesses, are about 40% more likely to be chosen by companies than arbitrators who show sympathy to consumers.
Sen. Richard Blumenthal, Connecticut Democrat, claims that these “forced arbitrations are unfair, unjust and un-American, because one of the principles of our American democracy is everyone gets their day in court.”
In addition to the dominance that arbitration clauses hold, the advantage businesses are most likely to have over consumers is that they have far more experience at arbitration than consumers. The average consumer, by contrast, is likely to have never arbitrated a complaint, while businesses have a much better sense of which arbitrators are more industry-friendly, leaving consumers with no idea what to expect.
There is an opt-out provision available to Chase credit card holders that rejects the clause. In writing, via snail mail, customers have to mail a letter to Chase stating that they reject the arbitration agreement within 60 days of receiving the bank’s notice of the arbitration agreement. Customers must include their name, account number, address, and signature. The letter must arrive by August 7, 2019. Military members are considered exempt from forced arbitration clauses by law. Although the process is a difficult one, it is highly recommended in order to protect your rights.