The Supreme Court this week issued a ruling that could have negative consequences for consumers struggling with credit card debt. According to the new ruling, credit card companies and other lenders (with the exception of mortgage lenders) can continue to include arbitration clauses in their agreements.
In order to understand why so many consumer advocates are outraged over the decision, it’s essential to understand what arbitration clauses are and how they work (hint: it’s almost always against the interest of consumers).
Understanding Arbitration Clauses
In essence, arbitration clauses are bits of legal language in a loan or credit card agreement that say all disputes concerning loan repayment terms must be settled in arbitration rather than taken to court.
Because these clauses are part of loan contracts, consumers must agree to them in order to get access to most loans—including credit cards, student loans and others.
But the arbitration process, which is consumers’ only recourse for disputes over credit card charges and fees, has been shown to be unfair to consumers. Here’s