Legal News

April 2008: The Month of Arbitration Flagellation?

By Dan Slater

Arbitration seems to be taking a beating these days. Earlier this month, the National Arbitration Forum, which helps resolve disputes between credit-card companies and their customers, came under fire for allegedly favoring credit-card companies over consumers. A suit filed against the NAF alleges, among other things, that in specific cases NAF approved an inflated award, improperly imposed attorneys fees and didn’t respond to a consumer’s request to appear at an arbitration.

Today, on a slightly different but related front, the Second Circuit Court of Appeals reinstituted a class-action against a group of banks that require their credit card customers to settle their disputes in arbitration rather than litigation. (Here’s the Reuters report.) The cardholders “alleged that the banks illegally colluded to force the cardholders to accept mandatory arbitration clauses in their cardholder agreements,” according to the ruling, violating antitrust laws.

Click here for the opinion.

The lower court judge had sided with the banks — which include Bank of America, Discover Financial Services and JPMorgan Chase — dismissing the case for lack standing, according to the report. The three-judge appellate panel disagreed. “The cardholders have adequately alleged antitrust injuries,” it said in its ruling.

Joe Ridout of the nationwide nonprofit group Consumer Action hailed the ruling, saying: “It’s unfair for consumers to have to give up their legal and constitutional rights just to get a credit card.”

Full post as published by Law Blog - WSJ.com on April 25, 2008 (boomark / email).