The U.S. Supreme Court issued a decision Tuesday that basically backs up credit card companies’ efforts to keep consumers from pursuing disputes in court.
Many lenders like to sneak a “binding arbitration” into credit card agreements. That means as soon as you sign the dotted line, you fork over your rights to take any future complaints to a judge.
That pretty much leaves two options: send your gripes in via snail mail or fill out an online dispute form.
The 8-1 ruling came even as many big lenders have decided to either drop their arbitration clauses altogether or stop enforcing them.
Wells Fargo turned heads in December when it issued notices to customers that they had until February 2012 to ditch the bank before it implemented a new binding arbitration clause.
The bank’s decision came shortly after it was targeted in a consumer-led class action suit over its alleged deceptive banking practices.
The central suit in Tuesday’s decision is a 2008 class action challenging CompuCredit Corporation’s arbitration clause.
In a 28-page opinion, U.S. Justice Antonia Scalia argued against plaintiffs’ claims that the 1996 Credit Repair organisation Act gave consumers the right to let a jury decide. The idea is that any mediator hired by a lender would be biased and they’d receive a fairer hearing in a court.
“The flaw in this argument is its premise: that the disclosure provision provides consumers with a right to bring an action in a court of law. It does not,” Scalia wrote.
Odysseas Papadimitriou, founder and CEO of CardHub.com, takes an optimistic view on the court’s ruling:
“As long as regulators do their jobs, which they only started doing again after the enactment of CARD Act, then binding arbitrations should be fine for consumers since the product terms will be very clear and credit card companies will not be able to do whatever they want. If, however, we regress to a regulatory environment where regulators are asleep at the wheel then consumers might very well need the protection of the courts.”
See the the Consumer Financial Protection Bureau’s new prototype for transparent credit card agreements here.