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A lawsuit has been filed in a New York federal court that charges eight credit card companies with violating US anti-trust laws through the process of mandatory arbitration which they have imposed on their customers.
The companies involved in the lawsuit are as follows: Bank of America Corp; Capital One Financial Corp; Citigroup Inc.; JP Morgan Chase & Corp; MBNA Corp; Morgan Stanley’s Discover division; Providian Financial Corp; and England’s HSBC Holdings. The lawsuit claims that these eight companies violated the anti-trust laws by conspiring to take away the right of cardholders to file disputes with the companies in a court of law.
The suit was filed on behalf of seven plaintiffs from various states, who contend that the companies involved “combined, conspired and agreed to implement and/or maintain mandatory arbitration.”
The lawsuit is in reaction to the fact that many large credit card companies require customers to sign away their rights to a court hearing if disputes should arise. The companies choose instead to settle disputes in a mandatory arbitration setting. Until this lawsuit arose that practice had not been questioned. This lawsuit, however, claims the process is unconstitutional and will require hearing in a court of law. Allegedly, some of the credit card companies involved in the suit convened in 1999 and formed a group called the “Arbitration Coalition” to further discuss the mandatory arbitration laws they impose on customers. The group is alleged to have met many times from 1999 to 2003, using their meetings to advise one another on various uses of arbitration, and ways to make the hearings stand up under the court system.
An arbitration process allows both sides of a dispute to be heard by an impartial third party who determines a resolution to the problem. Although it works much like a court, arbitration is completely outside of the legal court system, and in general it is illegal for those in industry competition to restrict trade or commerce in this way.
None of the banks involved in the lawsuit have commented on the proceedings so far, stating they do not release comments on pending litigation.
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