In response to legal and political pressure, JP Morgan Chase is removing the mandatory binding arbitration clause from its credit card contracts. Customers will receive a new member agreement reflecting the change first quarter 2010.
The pro-consumer change comes the same day that a partial settlement was reached in a case accusing Chase and other credit card companies companies of unlawfully conspiring to insert industry-wide arbitration clauses into their contracts. Chase said they won’t be replacing the clause with any other similar language, like a class-action waiver.
Mandatory binding arbitration is a clause inserted into many consumer contracts that forces consumers to revoke their right to lawsuit in the event of a dispute. Instead the case gets sent to an arbitration firm, which the company itself pays. The Christian Science Monitor found that the top 10 most used arbitration firms only found in favor of consumer 1.6% of the time. It’s about time these kangaroo courts got shut down.