Binding Arbitration with Citibank card

Texas:

I received a notice to change my credit card terms regarding binding arbitration. I am not sure what this means. Thanks for any help on this.

[bigun]

I got one as well. It's no big deal. It just says any lawsuit you file against them is resovlved in binding arbitration. However, read about halfway down the page and it says this does not apply if you file in small claims court and it stays in small claims court.

is they have something at end if one party files bankruptcy that this clause will survive.
I would have no reason to sue them unless they harrassed me to death.

[JETX]

This 'binding arbitration' addendum is NOT as minor as you think. There are a LOT of reasons why they are now doing this (and all of them are to their advantage).

"DALLAS — Your right to a trial by jury is in danger.

That is one of the findings in a six-month study published Sunday in the Dallas Morning News.

The study discovered that changes in the justice system are seriously eroding the role of American juries.

In conjunction with The Dallas Morning News, News 8 Investigates has learned how you may surrender your right to a jury trial just by using one company's credit card.

That company is First USA.

Susan Ellis is a flight attendant who is one of the named plaintiffs in a potentially huge class-action lawsuit that could affect millions of consumers across the country.

She's suing the credit card company First USA over allegedly bogus late fees and unfair interest rate hikes.

"This is my very first lawsuit," Ellis said. "I haven't done anything like this before in my life."

But First USA says Ellis can't file suit, and neither can any of its other cardholders, because of a notice the company slipped in with the bills it mailed out, which says by using the card, customers agree to binding arbitration to settle any disputes.

Attorney Britt Monts says First USA can't do that. "It needs to be consensual," he explained. "It needs to be the sort of thing that both sides agree to. It's not fair when the consumer has no idea that they have given up their right to a jury trial simply because something has been inserted with the flyers and the ads in their monthly bill. That is really not effective notice to waive an important right. The right of a jury trial, I think in our society, is a fundamental and important right under the Constitution."

Generally speaking, arbitration is faster, cheaper and simpler than going to cout -- for everyone concerned.

But that's not the what the lawyers in this case are fighting about.

According to court documents, First USA hired a company called National Arbitration Forum to handle its disputes. The company is headquarted in a small run of offices in Minneapolis.

NAF claims to have satellite offices in Atlanta, Chicago, Charlotte, New York, San Francisco and Washington, D.C., but News 8 discovered in calls to directory assistance in all but one of those cities that either NAF's number did not exist or it had been disconnected.

NAF says First USA does not control the outcome of any its arbitration.

However, court documents have been sealed to prevent the public from knowing how dependant NAF is on revenue from First USA.

Attorney Britt Monts has been studying the records which are available. "I think out of 19,700 times, the consumers won 80 or 90 times," Monts said. "Less than 1 percent of the time."

Both First USA and National Arbitration Forum declined to interview with News 8. Instead, each company sent a letter emphasizing the professionalism of NAF's arbitrators, who must have practiced law for at least 15 years and must have previous arbitration experience on other financial cases.

Both companies also stressed the neutrality of NAF's arbitrators.

But brochures NAF has sent out to drum up business with other corporations promise "Limits on Awards" and not to allow class action lawsuits unless "both parties agree."

"The biggest risk they have is the class action, and, if that is eliminated... if the arbitrator can provide safe harbor... then they've really eliminated one of their major risks," Monts said.

"Justice has not been served, and it's not just to me," said cardholder Susan Ellis, "but it's the American public."

Many cardholders say they've received zero help from government regulators in trying to make First USA do the right thing. They say a class action suit not only gives them a chance to get some money back, but it's also a way to publicly punish the company.

For now, the fate of the lawsuit rests in the hands of a Dallas judge, who is reviewing arguments from both sides.

On Monday, the Dallas Morning News continues its investigation into the judicial system.

Through actions such as binding arbitration, you'll see how the jury is being left out of the process."
Copyright: 2000 by WFAA-TV Co . All Rights Reserved.
Source: [url]http://www.wfaa.com/wfaa/articledisplay/0,1002,10630,00.html[/url]

Also,
"Texas’ civil court of last resort set itself up this year to reduce its work load and reward big business interests.

The name of the game is binding arbitration, which big business uses to deprive consumers of the right to a public trial by a jury of peers. Businesses prefer arbitration over jury trials because it settles disputes in secret proceedings
conducted by privately paid judges. Arbitration aborts the development of consumer-protection case law. Unlike a court of law, private arbitrators cannot force businesses to halt the most harmful or discriminatory practices.

The Texas Supreme Court heard arguments February 14 in a case involving consumers who filed suit after a company failed to fix defects in their new mobile home (In re First Merit Bank). The lender argued that the homeowners signed away their right to a trial. While two lower courts refused to force arbitration, Supreme Court justices voted to review the issue at the request of the bank and the Texas Manufactured Housing Association (TMHA), which filed an amicus brief supporting arbitration.

In January, the TMHA filed an amicus in another Supreme Court mobile home arbitration case (In re Homestar). In this case the justices are reviewing a 13th Court of Appeals opinion that cited federal consumer protections in ruling that the fine print of a sales contract cannot force homeowners into binding arbitration.

Illustrating the sweeping implications of the issue, the Homestar case elicited amicus briefs favoring arbitration from Gateway and Dell computer companies. In addition, the court heard two other arbitration cases in February: Mariner Financial Group v. Bossley and Helena Chemical v. Wilkins. Consumer groups argue that secretive, privately funded arbitrations unfairly benefit the most powerful party to a dispute. A leading credit card lender, First USA, has arbitrated 19,705 disputes. Arbitrators ruled for the bank in 99.6 percent of these disputes. Big business does not do that well in court—even in the business-funded Texas Supreme Court."
Source: [url]http://www.tpj.org/payola/docket11.html[/url]

Also, read:
[url]http://www.bankrate.com/brm/news/cc/20000522a.asp[/url]

[HomeGuru]

I agree with Halket. In general binding arbitration takes away a consumer's right to sue.
The Association for Trial Lawyers of America has a special Mandatory Arbitration Group because this issue has gotten so big with class action lawsuits against binding arbitration.
If all consumers really understood the real history of how binding arbitration was concieved, they would be unhappy. Binding arbitration came about as a cheaper and faster resolution for commercial entities to settle differences among themselves. Litigation was at times very costly and protracted. So the method of alternative dispute resolution was used only for commercial transactions. Business to business.
Then some people decided to use the method for consumer use and that is where the downfall and elimination of the consumer's right to sue started.
Check out the Texas website
[url]www.hobb.org[/url] and see how binding arbitration was used by unscrupulous homebuilders to screw homeowners that bought new homes with construction defects.

[bigun]

Wow! I guess I was a bit self-centered on the response. I very seldom carry balances on my cards so interest rates aren't that big of issue for me.
99.6% success rate. Damn, those guys are good! Keep us posted on those suits.