Have a Dispute with a Credit Card Company? Good Luck Getting a Fair Hearing.

By: Rick D. Massey, J.D.
Copyright © 2009

Everyone has heard that we were all created equal, but some are more equal than others. The law applies to credit card companies the same as to the rest of us. But they have exercised one of the fastest growing special rights that only apply to a privileged few – the right to buy justice. We all know major banks have employed lobbyists to buy legislation permitting them to charge usurious interest rates and to raise them at any time. But few realize this is the tip of a much larger iceberg many debtors will encounter soon.

People who have had their houses burglarized often say they feel as though they have been personally violated. Thanks to a huge brick that has been thrown on the big business side of the scale of justice, we have all been personally violated unless we are a large corporate entity. That brick is called “binding arbitration.” And it almost completely separates you from your constitutional right to a fair and meaningful trial.

Suppose you are the CEO of a major credit card company. When you meet with the mega law firm to discuss how you would like your contracts drafted, you are looking for a number of things. But these four will always be at or near the top of your wish list:

• Reduce your costs of litigation


• Structure your contracts for the highest probability of predictable results


• Ensure the greatest likelihood of favorable results


• Reduce the cycle time (and therefore the costs) of dispute resolution by streamlining the process and reducing the odds of appeal

Of course, you also want to control the entire proceeding as much as possible. As people are now beginning to realize, the banks and credit card companies are not trying to find ways to do you or me any favors.

The reasoning goes something like this: Who knows what a judge or jury is likely to do? But what if we force people into giving up their right to a jury trial? Better still, what if we could force them into giving up their right to the most important rules of evidence they would otherwise have in a court trial? Better still, what if we could buy the judge and force them to accept that verdict as the final decision? As this ABC News story (scroll down to view story) shows, none of these assertions are far-fetched.

The private arbitration contractor, National Arbitration Forum (“NAF”) that is the subject of this story has its own website where it pitches the concept of buying a “neutral” private judge to the corporate world. Included on the website is a publication entitled “From the Bench: Selected Judicial Opinions Supporting Arbitration”. The first opinion cited is a reference to them by Justice Ruth Bader Ginsburg in which she appears to be one of their fans.

[N]ational arbitration organizations have developed similar models for fair cost and fee aliocation ... They include National Arbitration Forum provisions that limit small-claims consumer costs.

What the NAF fails to mention is that this quote was taken from a footnote in a dissenting opinion regarding the issue of whether or not a consumer could be forced to arbitrate even when she cannot afford to do so. The NAF doesn’t mention Justice Ginsburg’s expressed concern that “[t]he arbitration agreement at issue is contained in a form contract drawn by a commercial party and presented to an individual consumer on a take-it-or-leave-it basis”, or that she concluded by saying “As I see it, the Court has reached out prematurely to resolve the matter in the lender's favor.”

Of course, an argument could be made that people aren’t “forced” to agree to these draconian binding arbitration provisions. They could move into a cave and go back to the barter system if they wanted to. But few non-lawyers understand the extent to which they are giving up their basic rights to the American justice system every time they sign one of these agreements.

As Judge Beam noted in his dissent to an opinion that granted punitive damages in an arbitration case (even though such damages were prohibited by State law) the structure of an arbitration proceeding eliminates so many protections otherwise available under the rules of evidence that it lacks almost all of the minimum requirements of due process and fundamental fairness.

In the arbitration setting we have almost none of the protections that fundamental fairness and due process require for the imposition of this form of punishment. Discovery is abbreviated if available at all. The rules of evidence are employed, if at all, in a very relaxed manner. . . Here, as noted by the opinion of the court, the scope of review of the arbitrator's award is narrowly limited if not almost nonexistent. "An arbitration award will not be set aside unless it is completely irrational or evidences a 'manifest disregard for law.'"

Binding arbitration agreements are popular with most large corporations, not just credit card companies. Some are more even-handed than others. But the goal is always to keep the matter out of the courts and into a more predictable if not more biased tribunal. If you are the little guy, you are almost always worse off than you would be if you could have your day in court.