Credit Card Disputes

In a September 2007 story, Marketplace's Helen Palmer reported that consumers have little chance of seeing disputed credit card transactions resolved in their favor. This disadvantage is due to a cosy relationship between the National Arbitration Forum and the lenders.

This report was based upon an analysis by Public Citizen, which found that consumers lost 18,000 of 19,000 disputes. In 15,000 other cases, Public Citizen found that there was a settlement, one of the parties stopped the dispute process, or the borrower filed for bankruptcy protection.

The report's authors noted that nearly all credit card customer service agreements mandate binding arbitration. While arbitration is sometimes a cost effective and fair method of dispute resolution, in this case the statistics indicate otherwise.

An industry representative, Edward Yingling of the American Bankers Association, was contacted in Palmer's report. He objected to the conclusions, saying that it "varies wildly from other respected research on the topic," but neither the report nor other public outlets have identified said "respected research." Yingling did not refute the findings that consumers lost a disproportionate number of the cases studied.

1. Arbitration outfits should be chosen by a neutral third party, and their findings should be published on the web.
2. The current incumbent, the National Arbitration Forum, should revisit the procedures involved in such settlements. If it is unable to improve this sorry record of biased adjudication, then it should be barred from participating in settling such disputes.
3. Citizens should be more proactive in reporting their difficulties in credit card disputes through means including epinions and other web-based forums.
4. Competition. Are there any lenders willing to brave real arbitration vs. this sham justice?
5. Support the Arbitration Fairness Act of 2007. Introduced as S. 1782 by Sen. Russell Feingold (D-Wis.) in the Senate and H.R. 3010 by Rep. Hank Johnson (D-Ga.) in the House, this bill would help consumers by eliminating pre-dispute binding mandatory arbitration (BMA) clauses in consumer and employment contracts. Public Citizen has a web form to help compose a message to your elected officials.
6. Other states should follow California's suit by requiring that arbitration resolutions be disclosed.

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