Buzz
Chase is beginning to implement a new binding arbitration rule for its credit card users, as initially reported by Fast Company’s Cale Guthrie Weissman last week.
The change, communicated via email to certain customers with Chase Slate and Chase Sapphire Reserve credit cards (myself included), is outlined as follows:
If you do not opt out of the arbitration agreement within the required time, any disputes with us will be resolved through binding arbitration. In arbitration, you waive your right to go to court, have a jury trial, or engage in a class action lawsuit. Instead, an arbitrator, not a judge or jury, will handle the resolution process, which is simpler and more limited than standard court procedures.
Weissman highlights that Chase eliminated its binding arbitration clause in 2009, following accusations that major banks nationwide were colluding to force customers into arbitration, denying them the right to sue. Chase, Capital One, and Bank of America agreed to remove such provisions until 2013. Now, Chase seems to be the first to reintroduce this practice.
The communication clarified that arbitration does not apply to those customers protected under the Military Lending Act.
Customers who wish to opt out of the arbitration clause must inform Chase by mailing their request by August 7, 2019. Be prepared to use a stamp, as your opt-out request must be sent by postal mail:
To opt out, you must submit a written notice rejecting the arbitration agreement. Your notice should include your name, account number, address, and personal signature. Send it to P.O. Box 15298, Wilmington, DE 19850-5298. Rejection notices sent to other addresses, by email, or through oral communication will not be accepted or effective.
When I reached out to Chase for clarification on the matter, the company “graciously declined” to comment.
How to understand your credit card’s arbitration policy
Locate your cardmember agreement, which should have been included with your credit card. If you've discarded the physical copy, log in to your account and check under the services or benefits section to find the agreement. Alternatively, you can call the number on the back of your card to request that a copy be mailed to you.
You can also explore the CFPB’s credit card agreement database, which seems to be updated through late 2018.
By late 2017, 12 of the largest card issuers in the U.S. allowed customers to opt out of arbitration, while nine others, including Capital One and Bank of America, did not require arbitration. However, nine of the biggest credit card companies in the country mandated arbitration with no opt-out option.
If an opt-out option exists, you’ll likely need to submit your request in writing.
Why this matter deserves attention
In an ideal scenario, your financial institutions would always treat you fairly, and you’d never feel the need to take legal action. But in the real world, problems with credit cards can arise.
The CFPB began researching the effects of mandatory arbitration clauses shortly after its formation and discovered that three out of four consumers were unaware if their credit card agreement included an arbitration clause. At the same time, more than half of credit card companies and banks used these clauses to limit disputes to those eligible for small claims court only.
In 2017, the Consumer Financial Protection Bureau attempted to address arbitration agreements with a proposed rule that would allow companies to include such clauses in their terms of service, but only if they allowed consumers to still pursue class-action lawsuits against those companies. The CFPB noted that companies predominantly used arbitration agreements to prevent group lawsuits.
Critics of the rule (mainly financial institutions) argued that individual lawsuits were better for plaintiffs. However, in a 2017 op-ed, then-director Richard Cordray stated, “We found that group lawsuits get more money back to more people. In five years of group lawsuits, we averaged $220 million returned to 6.8 million consumers annually. Yet in the arbitration cases we examined, only an average of 16 people per year received less than $100,000 total.” Shortly afterward, President Trump and Congress blocked the rule.
This is just one example of how the CFPB’s ability to protect consumers post-recession has been weakened. In early 2018, the CFPB's efforts to regulate payday lenders were reversed. A lot of the financial data that the CFPB once monitored has been discontinued, and while the bureau still gathers consumer complaints, it has taken significantly fewer actions against financial institutions since the Trump administration took office.
