Arbitration Can Be Avoided with 68% of Credit Card Issuers

Consumers can opt-out if they act fast 

Nearly 7 in 10 credit card issuers allow cardholders to resolve disputes in court rather than through forced arbitration, according to a new study from CreditCards.com. In many cases, however, if consumers don’t act quickly after getting a new card, that option can disappear for good.

The study reviewed 30 major credit card issuers and found that only 9 institutions have an arbitration clause that cannot be avoided. The remaining 21 issuers have either no arbitration clause at all or allow consumers to opt out of arbitration within a certain time period. The credit card companies reviewed account for 98.5% of U.S. consumer card balances. 

Arbitration is an alternative process to the court system in which a mediator hears both sides of the case and issues a decision.  There is no jury and the opportunity to appeal is unlikely.  Further, the process provides fewer protections for participants and can be more costly – likely deterring many from making claims.

Recently, Congress repealed the Consumer Federal Protection Bureau’s rule restricting arbitration.  However, it seems the annulment will have little effect on consumers.  Even without the regulation, 9 credit card issuers have no arbitration clause, including large financial institutions such as Bank of America, Chase and Capital One.  An additional 12 institutions allow consumers to opt-out of the clause, including American Express, Citibank and Discover.  Consumers must act fast, though. The typical opt-out time period is 30 to 60 days from the time the card is issued.

So, what can consumers do with an existing credit card that has an unwanted arbitration clause?  “If you don’t like your card’s terms, don’t be afraid to shop around and possibly even walk away,” said CreditCards.com senior industry analyst Matt Schulz. “You have more power with your credit card issuer than you realize if you’re willing to wield it. Ask if you can change your current card to a new one that lets you opt out of forced arbitration. If that doesn’t work out, shop around for another card with better terms. There’s never been a better time to do it.”

Almost all cards reviewed in the study have an exemption for disputes small enough to be handled in small claims court.  The exceptions are Key Bank and Fifth Third Bank.

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