Help Desk FAQ

Credit Cards

 

Must I agree to binding mandatory arbitration when I apply for a credit card?

Most credit card issuers used to require, as part of the cardholder agreement, that credit applicants agree to settle any dispute through binding arbitration. Arbitration is a form of dispute resolution in which an independent third party hears both sides of a disagreement and then decides how to settle it. Binding arbitration does not allow the losing party to appeal the decision. It also typically requires the consumer to give up the right to sue in court or participate in a class action lawsuit. And it’s not always free; some arbitration clauses require customers to pay their own arbitration fees, though some may cover the costs if the customer can’t afford them.

It used to be virtually impossible to find a card issuer that didn’t require card applicants to agree to binding mandatory arbitration. But, thanks to consistent efforts by consumer advocates, that is no longer the case. Today, there are many credit card issuers who have eliminated the clause from their cardholder agreements, and others who are not enforcing it.

When shopping around for a credit card, always read the terms of the agreement before committing to the card. If the contract has a binding mandatory arbitration clause, look for a different lender.

 

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