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Supreme Court: Consumers Can't Take Credit Card Companies to Court

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In the past, consumers who had concerns about charges or fees that had been added to their credit card accounts were able to take their lenders to court to dispute them. But thanks to a new ruling from the U.S. Supreme Court, this is typically no longer the case.

The U.S. Supreme Court recently ruled 8 to 1 against consumers’ right to take their credit lenders to court over disputed charges and fees added to their accounts, according to court documents. Instead, they will now almost always be required to take their claims to an arbitrator instead.

That’s because the court believes that the arbitration clauses which are now being included in almost all consumer credit agreements supersede borrowers’ ability to take their claims to court. Previously, a federal law passed in 1996 allowed disputes to be taken before a judge, but this ruling trumps the 15-year-old requirement.

“Who are you going to favor, the company that might send you more business, or the consumer who you’ll never see again?” Lauren Saunders, the managing attorney at the National Consumer Law Center, told NPR.The decision has come under fire from consumer advocates, who say that the arbitration process is less likely to be borrower-friendly, according to a report by National Public Radio. Where a court was more likely to hand down unbiased rulings, independent arbitrators are likely to have a financial stake in siding with lenders.

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Arbitration clauses are included in everything from credit cards to student loans and auto loans, the report said. However, federal law still prohibits them from being added to mortgage agreements.

Fortunately for consumers, this may not be the end of the arbitration clause debate, the report said. The new federal Consumer Financial Protection Bureau is always looking at the ways lending contracts may be negatively affecting consumers, and experts say this decision could prompt the agency to study the end result many people face as a result of these clauses.

The CFPB recently got a boost in its power by having former Ohio attorney general Richard Cordray named to its top executive position. Within days of taking office, he expanded the purview of the agency’s efforts to include more consumer financial products.

 

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