JPMorgan Revives Forced Arbitration for Credit-Card Holders

(Bloomberg) -- JPMorgan Chase & Co., the biggest U.S. credit-card issuer, is reviving a controversial policy that forces credit-card customers to use arbitration instead of court to resolve payment disputes.

The bank has been notifying customers of the change in recent days, by email. The revised policy affects all but one of JPMorgan’s 16 credit cards, including the popular Sapphire Reserve, and prevents customers from banding together to bring class-action lawsuits.

The reversal comes almost a decade after JPMorgan agreed to drop the clause from contracts for at least 3 1/2 years to help settle an antitrust lawsuit. The bank’s checking and savings accounts already include provisions for forced arbitration, according to spokeswoman Mary Jane Rogers.

While banks say mandatory arbitration is faster and cheaper for the public than litigation, consumer advocates say the practice lets financial institutions avoid accountability.

“Arbitration has long been a standard practice in our consumer-banking and auto-finance businesses,” Rogers said. “In consolidating our credit-card company charter into the bank, it was timely to create a consistent experience across our consumer businesses.”

Antitrust Settlement

Fewer than 16% of U.S. credit-card issuers include arbitration clauses in their contracts, according to a report to Congress by the Consumer Financial Protection Bureau published in March 2015, though the number would be higher if four of the biggest issuers -- JPMorgan, Bank of America Corp., Capital One Financial Corp. and HSBC Holdings Plc -- hadn’t agreed to remove the clauses to settle the antitrust class action in 2009 and 2010. Only 8% of banks include them in their checking account agreements, according to the study.

The CFPB finalized a rule in 2017 that would have barred the use of forced-arbitration clauses in contracts for credit cards, bank accounts and other financial products. President Donald Trump signed a bill undoing the rule shortly after.

JPMorgan’s AARP card won’t include the change, Rogers said. Customers can opt out if they mail a written rejection notice by Aug. 9.

“By accepting this arbitration agreement you GIVE UP YOUR RIGHT TO GO TO COURT (except for matters that may be taken to a small claims court),” according to the updated agreement.

Similar arbitration clauses prevented Wells Fargo & Co. customers from joining together to challenge the bank after employees were accused of opening millions of accounts without clients’ permission.

To contact the reporter on this story: Michelle F. Davis in New York at mdavis194@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Dan Reichl, Steve Dickson

©2019 Bloomberg L.P.