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Credit card debt and arbitration clauses

Many Pennsylvania residents who have credit cards are bound by agreements to enter into arbitration instead of being able to file lawsuits against their credit card companies. Although arbitration is touted as a less expensive and quicker method to resolve disputes than court litigation, these clauses generally favor the credit card companies while preventing consumers from being able to file class action suits.

The Consumer Financial Protection Bureau recently released the results of a study that looked at arbitration clauses and how they ultimately affect consumers. It was found that although companies had lower costs due to not having to face class action lawsuits, those savings were not passed on to consumers.

Arbitration clauses are often buried in the fine print of credit card agreements. They serve to greatly limit the rights of cardholders in a potential dispute over their credit card debts. A review of arbitration results revealed that consumers were awarded a total of less than $175,000 in damages out of 1060 cases filed in 2010 and 2011. Arbitration panels also awarded a combined total of less than $200,000 in debt forgiveness, while ordering consumers to pay nearly $3 million to the issuers.

Credit card debt can quickly balloon, causing a negative financial spiral for those carrying it. When debt is disputed, arbitration clauses provide little protection to consumers. People who are faced with credit card debt that has become unmanageable may want to consider personal bankruptcy as an option. If a bankruptcy petition is successful, credit card debt may be discharged, removing the debtor's responsibility to pay it. People who are in such a situation with their debt may want to seek a consultation with a bankruptcy attorney to determine the options that may be available.

Source: credit.com, "Consumer Watchdog Says You Should Be Able to Sue Your Credit Card Company", Bob Sullivan, March 10, 2015

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