Arbitration clauses in credit card agreements

On behalf of Bankruptcy Law Firm of Clare Casas on Tuesday, March 24, 2015.

Many Floridians become mired in credit card debt every year. In a case in which a credit card company has engaged in bad practices, most debtors who are engaged in a credit card dispute may find themselves unable to file a lawsuit.

Most credit card companies include mandatory arbitration clauses in their agreements. While companies tout arbitration as a faster, more cost-effective way to resolve disputes, some studies have demonstrated that arbitrator decisions largely favor the credit card companies instead of the consumers.

The Consumer Financial Protection Bureau reviewed data from 1,670 cases filed in 2010 and 2011. The arbitration rulings in these cases resulted in less than $175,000 awarded in damages and less than $190,000 awarded in forbearance of debt to all the consumers involved. The credit card companies, on the other hand, received awards totaling $2.8 million. The CFPB is calling for the prohibition of arbitration clauses in credit card agreements, stating that consumers should have the ability to sue. The Dodd-Frank financial reform bill previously forbade the inclusion of arbitration clauses in mortgage contracts, and the CFPB has indicated such a prohibition in credit card agreements is also warranted.

When people are overwhelmed by unsecured debts they are unable to pay, they may want to consider filing personal bankruptcy. Through a bankruptcy, a person may discharge credit card debt and obtain a financial fresh start. When a debt is discharged in bankruptcy, the bankruptcy court issues an injunction preventing creditors holding the debt from pursuing any further collection activity to collect on it. Lawsuits, garnishments and creditor harassment must all stop upon the petition’s filing. Although bankruptcy may not be the best option for everyone, it is a very good choice for people in some circumstances. People who have a significant debt load with which they are struggling may want to speak to a bankruptcy lawyer.