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Arbitration clauses: A potential issue for credit card users

Many Ohio residents make use of credit cards, but a large number of these individuals may be unaware of arbitration clauses that restrict their ability to sue in the event of alleged wrongdoing by the company. According to the Consumer Financial Protection Bureau, three-fourths of consumers are unaware of arbitration clauses, and only 7 percent understand the implications of this type of stipulation.

Arbitration is a form of dispute resolution that leaves the resolving up to an independent third party instead of a judicial court. Industry groups claim that arbitration clauses lower consumer costs for credit card services, but a study carried out by the CFPB concluded that arbitration proceedings tend to benefit companies more than consumers.

Out of the 1,060 arbitration disputes filed between 2010 and 2011, arbitrators ordered consumers to pay companies about $2.8 million, while consumers were awarded less than $190,000 in debt forbearance and less than $175,000 in damages. Out of all the arbitration disputes filed across six different consumer markets between 2010 and 2012, more than 20 percent of the disputes were filed by companies instead of consumers. When credit card issuers are sued by consumers, companies use arbitration clauses to block the lawsuits 65 percent of the time.

Banks that represent more than 44 percent of all insured deposits in checking accounts utilize arbitration clauses, and card issuers that hold more than half of all credit card debt have arbitration clauses. When just these credit card issuers are taken into consideration, as many as 80 million consumers are affected by arbitration clauses.

Debt can be overwhelming, but going bankrupt is not the only solution. By working with an attorney who understands the technicalities of debt and other financial challenges, individuals may be able to eliminate their debts, prevent foreclosure and other consequences and obtain a fresh start.

Source:, "Consumer Watchdog Says You Should Be Able to Sue Your Credit Card Company," Bob Sullivan, March 10, 2015

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