JPMorgan Chase Bank, one of the largest U.S. issuers of consumer credit cards, is reviving rules that prevent cardholders from suing the megabank in court, including as part of group lawsuits.
Chase abandoned such controversial “binding arbitration” clauses in 2009. But in late May and early June 2019, Chase cardholders began receiving email notices that the bank would again institute the arbitration provision unless existing cardholders opted out.
A Chase spokeswoman said the move is part of a corporate structure change. “Arbitration has long been a standard practice in our Consumer Banking and Auto Finance businesses,” said Chase spokeswoman Mary Jane Rogers. “In consolidating our credit card company charter into the bank, it was timely to create a consistent experience across our consumer businesses.”
The change will apply to all Chase cards except ones it issues with AARP because of an existing contract with that organization, Rogers said.
What is arbitration and how can I opt out?
Chase’s new rules mean that unless you opt out of them, customer disputes with the bank must be resolved in the arbitration system, not the court system. You don’t get a jury trial or the ability to join with others in a class-action lawsuit. Procedures are more limited than in a court case, and your case is decided by an arbitrator.
Opting out involves writing a letter to Chase by early August 2019. Exact deadlines differ slightly among cards. They are listed in the nearly 4,000-word email notice, along with details on rejecting binding arbitration. If you don’t opt out, the new clause goes into effect, except for those covered by the Military Lending Act. They are exempt.
Nerdy tip: NerdWallet examined several of these notices and the instructions were the same: You must state in writing that you reject the agreement to arbitrate and include your name, account number, address and personal signature. Your notice must be mailed to Chase at P.O. Box 15298, Wilmington, DE 19850-5298.
Why does Chase require a letter be sent by postal mail when so many communications are online? “It was a business decision made to ensure we captured the customer’s preference accurately,” Rogers said.
Is binding arbitration good or bad?
Suing your credit card issuer might be a rare occurrence, but limiting your legal rights with binding arbitration is mostly seen as good for banks and bad for consumers. Consumer advocates claim the arbitration system — as opposed to the court system —heavily favors the financial institution over the consumer.
The federal Consumer Financial Protection Bureau has said such clauses are aimed at denying a consumer’s day in court and preventing them from joining with others to make it economical to sue over relatively small amounts of money.
“By forcing people to go it alone or give up, companies can avoid accountability and continue to harm people,” a CFPB video says. CFPB efforts to limit arbitration clauses were stopped by Congress in 2017.
However, banks have claimed arbitration is a better, less costly system for settling fights with customers.
“Arbitration is a convenient, efficient and fair method of resolving disputes at a fraction of the cost of expensive litigation, which helps keep costs down for all consumers,” the American Bankers Association said in 2017 as the topic was being hotly debated.
Chase said its experience is “that arbitration is often faster, less expensive and provides better outcomes for our customers.”
Besides opting out and those covered by the Military Lending Act, the only other exception to Chase’s new arbitration requirement is when you sue in a small claims court instead of arbitration “if the claim is in that court’s jurisdiction and proceeds on an individual basis,” the Chase agreement says.