JPMorgan Chase & Co. (NYSE:JPM) Drops Arbitration Clause From Card Contracts in Antitrust Lawsuit
JPMorgan Chase & Co. (NYSE:JPM), the largest credit card lender in America has agreed to drop the use of an arbitration clause in order to move forward in settling an antitrust lawsuit which included a number of other large financial institutions.
The dispute centers around those wanting credit cards with these companies having to sign an arbitration clause before they were allowed to open a credit card account with the companies. What it did was mandate the customer to arbitrate rather than go to court over disputes.
JPMorgan, so far, is the only defendant that has decided to settle in the case, and as part of going forward in the case agreed to eliminate the arbitration clause for a minimum of 3½ years, beginning in 2010.
According to the lawsuit, a number of large financial institutions, including (besides JPMorgan Chase) Capital One Financial Corp (NYSE:COF), Bank of America (NYSE:BAC), HSBC Holdings PLC (NYSE:HBC) and Discover Financial Services (NYSE:DFS), among others, were in violation of antitrust laws because they engaged many times in secret consultations with the purpose of making arbitration the required practice in settling all the disputes between cardholders and the companies.
The two major companies involved with the arbitration process, National Arbitration Forum and American Arbitration, no longer are part of the process of consumer-debt arbitration, as banks continue to move away from controversial practices in an hostile environment.
Much of the case centered around alleged practices of the National Arbitration Forum, which was by far the largest of the companies arbitrating credit card disputes. They were accused of masking their connection to collection firms, which supposedly won the vast majority of arbitration cases.
The National Arbitration Forum settled their part in the practice on July 17, 2008, in Minnesota. Per the settlement, they are no longer allowed to enter into any new consumer debt-collection disagreements.
For JPMorgan, they’ve agreed to no longer require their cardholders to settle disputes via arbitration.