Major credit card issuers distanced themselves from the controversial and common practice of mandatory arbitration on Wednesday, after a second arbitration firm said it would stop handling consumer debt-collection cases.
JPMorgan Chase & Co. said Wednesday that it has stopped filing consumer credit card arbitration claims and that it is "continuing to evaluate the inclusion of an arbitration provision in its consumer contracts."
Paul Hartwick, a spokesman for Chase, said in an email Wednesday, "Chase seeks to provide excellent service with integrity and respect for our customers. As a result of recent events, we are taking swift and appropriate action."
American Express Co., which said it does not use arbitration to pursue collections claims against cardholders, also said Wednesday that it is "reassessing the options we can offer our customers for those unusual circumstances when a dispute is not resolved through our customer service channels."
National Arbitration Forum Inc., the country's largest consumer credit arbitration company, agreed to stop handling all consumer debt cases, including credit card cases, as part of a settlement with the Minnesota attorney general's office announced Sunday.
The American Arbitration Association, another large firm often used by credit card companies, subsequently said it had placed a moratorium on consumer debt-collection cases. (Unlike the National Arbitration Forum, it will continue handling complaints that are brought by cardholders against issuers. Many times these complaints originate as lawsuits and are then moved into the arbitration system when the issuer invokes the arbitration clause in the cardholder agreement.)
"A series of important fairness and due process concerns must be addressed and resolved before we will proceed with the administration of any future debt collection arbitrations," Richard W. Naimark, a senior vice president at the American Arbitration Association, said in prepared testimony Wednesday before the House Oversight and Government Reform Committee.
JAMS, a third major arbitration firm used by some issuers, said it does not handle debt-collection cases. Jay Welsh, its general counsel, said JAMS will continue hearing disputes brought by consumers against issuers, "and we encourage Congress to clarify the pre-dispute mandatory arbitration issues involving consumers."
Most credit card contracts include mandatory arbitration clauses, which issuers use to pursue debt collections or settle consumer complaints outside of the court system. Issuers say that arbitration avoids expensive and time-consuming court battles, but consumer advocates have long criticized the practice for deflecting consumer complaints from the courts into a forum said to be friendlier towards banking interests.
A spokeswoman for Capital One Financial Corp. said it also "does not use arbitration for collection purposes" and "we continuously evaluate our customer contract provisions to determine if changes are warranted." A spokesman for Citigroup Inc., which said Monday that it "generally does not use arbitration firms to collect debts," would not discuss the matter.
Bank of America Corp. did not respond to calls or emails. A spokeswoman for Discover Financial Services , which said Monday that it "does not initiate arbitration as a means of enforcing customer collections," said Wednesday that its cardholders "can still choose to pursue a claim through arbitration or go to court. Discover will continue to work with AAA or JAMS when cardmembers pursue arbitration of a claim through them."