Landmark Settlement: Consumers Can Finally Sue Credit Card Companies

By Sarah Pierce

Have you ever noticed in the fine print of your credit card contract that you’re not allowed to sue your credit card company? If you paid attention when you signed up (and we know you did), you knew you were signing away your rights to take any legal action against your credit card company in a court of law. If you wanted that handy piece of plastic, you had no choice but to agree to have all legal disputes settled by private arbitrators. 

Is that fair? No. Is that legal? According to a recent settlement: No

Consumer advocates have been arguing for years that mandatory arbitration clauses in credit card contracts are illegal, but it’s only now that the Courts have finally agreed. Four out of the six major financial institutions named in a class action lawsuit have agreed to settle allegations that they conspired together and violated federal law by forcing cardholders to sign away their legal rights to take legal disputes to court and to participate in class actions against these companies.

All defendants deny that they violated any law or conspired with each other, but Bank of America, Capital One, Chase and HSBC have agreed to settle. Discover, Citibank and National Arbitration Forum have not settled, and the case is still pending.

So what does this mean for you? The partial settlement offers no money for cardholders, but it will require the settling defendants to cease enforcing arbitration clauses and class action bans against their cardholders and to remove these clauses and bans from their credit card terms for 3-1/2 years. The landmark settlement will also open the door to larger class actions to be brought against the credit card companies.

For more information about your rights in this case, visit www.arbitration.ccfsettlement.com.

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Updated April 13th, 2010

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