'Marketplace' Report: Credit Disputes Favor Firms A study says that most disputes between credit card companies and card holders are settled in favor of the companies. Marketplace's Steve Tripoli talks about what consumers should be aware of when it comes to the fine print in credit agreements.
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'Marketplace' Report: Credit Disputes Favor Firms

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'Marketplace' Report: Credit Disputes Favor Firms

'Marketplace' Report: Credit Disputes Favor Firms

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From NPR News, this is DAY TO DAY.

You do not want to mess with your credit card company in court. That is the warning today from the group Public Citizen. MARKETPLACE's Steve Tripoli is here now to tell us more. And Steve, Public Citizen has any report out today. What does it say?

STEVE TRIPOLI: Well, it's sort of not about court in a way, Madeleine. They're saying watch out for the small print in your contract. You know those little notes with contract language the card companies stuff into your bill? Well, they often contain what's known as a mandatory binding arbitration clause. What's that? In that clause, you, the consumer, agree just by using the card, to settle all disputes outside of court using binding arbitration with one of a small selection of arbitrators.

BRAND: And so what's wrong with that?

TRIPOLI: Well, Public Citizen says plenty. They got a hold of 34,000 arbitration cases in California and say the credit card companies won their claims more than 95 percent of the time. Today, I asked the report's author, John O'Donnell, if that number by itself reveals a problem. And he said it does. Why? Because the arbitration firms do millions of dollars in repeat business with the card companies and almost none with you.

That's a conflict of interest. He says it gives him an incentive to find in favor of their paymasters. And O'Donnell says that's led to some truly breathtaking outcomes.

Mr. JOHN O'DONNELL (Congress Watch): We uncovered cases where people who were victims of identity theft ended up losing in binding arbitration because the credit card company took them to arbitration, refused to listen to them when they said no, no, no, that's not me. And in one case a woman had to pay $53,000 after her identity was stolen.

BRAND: Steve, that's an outrageous story. Isn't arbitration supposed to be impartial?

TRIPOLI: Well, not when it's done this way, says Public Citizen, at least. They say are two other problems here aside from this who-pays-who conflict. The first is that consumers should only agree to arbitration if they wish to after the dispute arises. You know, having it slipped into your contract in advance is different from that. It's a little like my going to the grocery store checkout counter and having to agree before I pay that I won't sue the supermarket if I get food poisoning.

And the other problem Public Citizen identifies is that this is, in their words, an end-run around a fundamental right, the right to have your disputes heard in court.

BRAND: And what do the card companies and the arbitrators, what do they say in their defense?

TRIPOLI: Well, they say it's all hogwash. They say the system is fair and fast and that the outcomes reflect what you'd get with the jury trial anyway. They say arbitration merely simplifies and speeds up dispute resolution and that no one's getting hurt.

BRAND: So if I'm a consumer and I have a problem with my credit card company, what can I do?

TRIPOLI: Well, that's a problem here because it's often hard to find a credit card that doesn't make arbitration mandatory. But there is at least one option. John O'Donnell at Public Citizen told me many credit unions offer no-arbitration credit cards.

And two things here finally, Madeleine. If mandatory arbitration worries you, there is a new bill in Congress that would allow consumers to choose between court and arbitration and credit card disputes.

And if all this doesn't worry you, well, you know, you can have more of it because mandatory arbitration clauses have been popping up in everything from student loans to nursing home admission contracts to pest control agreements.

BRAND: Thank you, Steve. That's Steve Tripoli of public radio's daily business show, MARKETPLACE. And MARKETPLACE is produced by American Public Media.

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