Chase Mandatory Arbitration: Stop Complaining, Start Fighting

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The following is not legal advice but you already know that. 

The general public is misinformed, ill-informed, and inadequately informed when it comes to consumer arbitration. I just read a post on Miles to Memories called Chase Changed Their Arbitration Terms – How To Reject This Change & Why You Might Want To. As a consumer arbitration attorney that has beaten, in arbitration, banks like Citi (see Beating Citi in Arbitration, What It Means for You) and telecom companies like Verizon among others, I have to set the record straight and tear apart every point in the blog post.

I’ll go line by line.

  1. First, the proceedings are private, so if they’ve done something wrong, there’s less publicity. This is misleading. It is irrelevant if the actual proceeding is private. What is more important is that the proceeding is not confidential. The only party that has to keep the arbitration confidential is the arbitrator. The winning party or the losing party can reveal anything about the arbitration including the arbitrator’s reasoning. Indeed, if a consumer wins an arbitration, he or she can have the award confirmed by a court. This makes the result public. From there, it’s up to consumers and the media to publicize the result. If it results in a victory for the consumer then it should be shouted from the rooftops. If it is an unfavorable result for the consumer then, like court decisions, the public can weigh in on the outcome.
  2. It’s much cheaper because each individual consumer would have to bring legal action against the bank. Here is another incorrect mischaracterization of arbitration. First, in terms of arbitration costs, companies have to pay the filing fee for each arbitration. This is thousands of dollars. In addition, the company has to pay for the services of the arbitrator. Sure, one case is pennies, but how about having to do so for 60,000 clams. That is hardly cheap (see Uber’s Arbitration Addiction Could Be Death by 60,000 Cuts).
  3. Consumers are generally not going to go to the trouble for a few bucks. This is wrong for so many reasons. To begin, people in the points hobby are the most frugal people I have ever met. Take one point away, one benefit, or one lounge away from them, and they’ll cry, “Lawsuit!” If there’s any chance for points enthusiasts to recover anything, they’ll try. Second, a few bucks multiplied by thousands of claims is not a few bucks. Trivializing claims by saying it’s only a few bucks is how big businesses get away with ripping customers off one by one. Third, what trouble is the author speaking of? All someone who has a consumer dispute is file a notice of dispute directly with the company (or submit an inquiry with Bachuwa Law) and wait for a response. If there’s not a settlement, the consumer can file the arbitration, have the company pay for the majority of the arbitration (if not the whole thing), and present his or her case. That will take months, not years like class actions. The usual result for a claim with merit, lest my disclaimer that prior results don’t guarantee a future outcome, is a healthy settlement. A settlement that’s much better for the consumer than a case of Redbull from a class action (see The Fine Print: No Class-Actions Against Banks? So What). This brings me to the fourth error in the post.
  4. If there’s a class action it’s not just a few bucks for one consumer, it’s a few bucks for each member of the class and that could be millions of people. First, the general public needs to understand that class actions aren’t easy to file. There is a complex procedure for bringing a class action that isn’t as easy as “a bunch of us got ripped off, that’s a possible class action.” And even if an issue is class-action worthy, the chances that the dispute is not governed by an arbitration agreement these days is slim to none. Like it or not, the Court has upheld arbitration agreements as enforceable time and time again. The only way that this will change is by legislative action, something unlikely to happen in the near future. Next, who wants a few bucks? Consumers should seek all damages allowable under law against companies that behave badly. On an individual basis, this could mean significantly more money than the the class action settlement whereby the lawyers get millions and the consumer gets pennies.

I tried to take a soft approach in an attempt to convert the skeptics about the benefits of consumer arbitration. I used to write frequently for Frequent Miler on the subject. While I made some progress, most remain unconvinced. Here are the usual comments: “Consumer arbitration is a scam.” “We want class action.” “Bachuwa doesn’t know anything.”

This time around, I’m taking a different approach. I’m calling out those who write about a topic they know nothing about and discrediting their misinformation. I’m also urging everyone who has a dispute to file a complaint. I’m asking everyone to publicize the result of his or her claim whether he or she wins or loses. The alternative is to keep bitching about how unfair everything is and hope that companies grow a conscience. How do you think that will go?

 

27 COMMENTS

    • If you opt out, they close your account, which is their right. Sneaky banks.

      Edited: I should’ve said don’t be surprised if down the line they close your account. I don’t expect them to do it in retaliation but they may come up with another valid reason and then it would be legal to do so.

  1. About ten years ago, BofA and Chase changed their longstanding policy about the order in which transactions are applied against an overdrawn account, reversing a policy which had calculated to maximize the number of overdraft fees that could be charged against an account.

    Under the since-changed policies, if you had a $2000 balance and made a $5 food purchase and a $2200 mortgage payment on the same day — but the food purchase earlier — and the bank chose to pay both amounts under overdraft rules, the bank would process the $2200 then the $5, charging two $35 overdraft fees, instead of processing $5 then $2200 and charging one $35 overdraft fee.

    These policy changes occurred coincidentally with a a bruising series of class-action lawsuits against Bank of America, Chase, and Wells Fargo alleging that this policy was unfair; these lawsuits were settled for more than $1 billion in total.

    Is it your contention that if courts had refused to hear these class-action lawsuits, and that if consumers had all instead been eligible to use arbitration to settle their disagreements, that the banks would have made the same policy decisions?

    I think you are proposing a mechanism where each consumer affected by the multiple-overdrafts policy would have separately asked for their money back in arbitration, and each one would have gotten the $35 back, and the banks would have noticed this happening too often and would have unilaterally decided to stop this practice to avoid expensive arbitration payouts. Is this your contention? Are you saying that this would happen?

    I’m totally happy to be pointed to any legal-review literature which makes the case that binding consumer arbitration leads to favorable policy outcomes for consumers — I would be thrilled to be educated. Alternately, can you give an example of a financial institution changing its policies after an unfavorable arbitration result?

    • You’re still missing the point. I didn’t say class actions don’t bring about change. I said they are a thing of the past. So you can live in nostalgia world or you can try a new way.

      • Oh! Yes! Fair point.

        (1) Totally on board with the idea that there are untapped benefits in consumer arbitration, and you can get a better deal than you might think with the process.

        It kind of seems like “no one wins, this structure is terrible, don’t even try” is exactly the message banks might want to quietly promulgate to prevent people from trying. And encouraging people to try arbitration and publicly document the results seems like exactly the best thing to do (for each consumer and overall) in this setup.

        I’m a big fan of the public database of arbitration outcomes at https://levelplayingfield.io/ — do you recommend any others?

        (2) It might be a mistake to confuse the way things are with the way things always will be. The Consumer Financial Protection Bureau, before its exsanguination, very nearly set up a rule that was meant to let people sue banks in class action suits whether or not the banks had tried to get people to agree to arbitration.

        I don’t think things have to stay the way they currently are forever. The way they are now is still pretty new. It’s shortsighted to think the environment could never change (and it’s a self-fulfilling prophecy).

        I agree it’s true that electing new representatives and enacting new regulation is not exactly a short-term thing you can do to get your $35 fee back from a bank right now. But things could change! We could change them!

  2. I was hoping that you’d weigh in on this, since I was debating what to do. Thanks. I feel more comfortable with the changes now.

  3. This info is much appreciated, but I’m still confused about what seems to be the most important question for everyone in this situation:

    Is it in the consumer’s best interest to accept or reject Chase’s forced arbitration and why?

    Most consumer advocates argue that arbitration is biased AGAINST the consumer. Evidence provided towards this argument includes statistics showing that arbitration cases are significantly more likely to be decided against the consumer, when compared to lawsuits.

    https://www.reuters.com/article/us-otc-arbitration/sweeping-new-arbitration-study-enterprising-plaintiffs-lawyers-adapt-idUSKCN1LS2YK

    I was all set to send the refusal letter. It seemed to me to allow me the option to sue without any downside (apart from the cost of a stamp). Someone above suggested that Chase would close the account if you reject arbitration, but this is not stated in the Chase email anywhere.

    • I agree with just about everything you said. The bias word is a bit touchy but the data is correct: consumers tend to lose. Why they lose is a story for another day. To your question, I wouldn’t opt out for the reasons I gave. If you did and I was Chase’s attorneys, I wouldn’t be too worried about repercussions for closing your account. I don’t see a legal basis for why they have to keep you as a customer. However, California courts may see it as retaliation. Nevertheless, if Chase does you harm, arbitration will bring you personal relief far faster and perhaps with a higher premium than a pie in the sky claim that probably will never turn into a class action.

      • I would love to hear the “story for another day” someday (about why the consumers tend to lose more in arbitration). Is it just that they need a lawyer? The findings mentioned in the Reuters article seem to suggest so.

        • It’s a combination of things. My biggest issue with consumer arbitration is the same issue I have with the Supreme Court. Instead of coming out with a bold decision, some arbitrators take the easy way out and give companies the benefit of the doubt. Since consumer cases are individual, arbitrators can say that this is a ‘one off’ and will not have evidence that this has happened to thousands of other people. At the same time, I have had arbitrators who see what’s going on and call out the companies and impose stiff penalties on companies that act shady. It’s the lack of consistency that makes the process frustrating. But that doesn’t mean the whole system is rigged.

        • What do you see as a way for the problems (primarily the inconsistencies) of the arbitration process to get improved? Or do you think that will become irrelevant if the sheer number of complaints (presuming that customers do step up and stand up for themselves this way) would cause companies to change their agreements yet again toward something else?

          With arbitration agreements in such widespread use already, thank you for educating on this topic.

    • I had a problem that Bachuwa Law helped me resolve through arbitration. Lest there be any question, I comment way too much to be some shill. I have only one experience, but it worked out very well.

  4. New here, can you write up some success stories of individuals? I think that would change people’s minds if they saw actual results

  5. Misinformation never helps any cause, so Alex, thanks for clearing things up!

    That said, I think you haven’t addressed the main issue that people have to complain about. You can counter skepticism about arbitration itself, but that doesn’t mean that people should be complacent about the fact that they will be barred from other legal recourse for any future disputes if they don’t take action now.

    Is there any benefit to going along with the arbitration provision of the new Chase card agreement (or any other company’s terms and conditions) whenever they have an option to opt out? It seems to me like there is no benefit to the consumer, only a possible downside. Why not just reject the arbitration provision whenever possible and leave one’s options open? If arbitration is the best choice for a particular circumstance, the parties would still be free to choose it. As we can see, many companies even seem to prefer it, so I’d imagine they would readily agree if the customer were to request it.

    You consistently advocate for consumers who are wronged to file a claim via the available avenues (often arbitration), rather than to give up. In the same spirit, shouldn’t those who care about unfavorable changes to their terms and agreements be encouraged to exercise their right to reject those changes? Even more, shouldn’t they tell others about the importance of doing so, for their own protection and possibly to achieve some kind of collective effect (not unlike what you suggest in this post could occur if many people pursued claims via arbitration)?

    Perhaps class actions aren’t always so great and are a thing of the past, but it doesn’t seem good for consumers to casually allow the opportunity for full legal due process to slip away from them by waiving their right to go to court (by this, I’m referring to the binding nature of arbitration, almost nonexistent appeals options, disregarding of rules within a proceeding by a moody arbitrator, and inconsistent outcomes across cases—all recounted by Attorney Steve Lehto in his YouTube video and associated blog post on arbitration).

    On another note, many people seem to be wondering or assuming about Chase closing accounts where customers have rejected the arbitration provision. Upon my inquiry via secure message, Chase informed me that they will not close my Chase account if I were to reject the arbitration provision. I also rejected the arbitration provision for Citibank 2½ years ago, when they updated their card agreement to include one, and my Citi account is still open. And, I rejected AMEX’s arbitration provision a few months ago without having my accounts get closed. Those are just my individual reports, and of course the banks are allowed to close accounts for pretty much any reason—but that was always the case. I did read a few mentions of customers’ accounts getting closed from rejecting the arbitration provision. I don’t know what happened there. I wonder if they had (intentionally or unintentionally) rejected the entire card agreement—which, yes, will cause the bank to close the account.

    • I had included links to the YouTube video and blog post I mentioned, but they got stripped out. They should be easy to find on Google, though.

    • I can’t see how rejecting the arbitration agreement=closing the account. I don’t think they would be that explicit.

      I agree with your premise: opt out to day and have the option tomorrow. The way it is portrayed is that opting out is the way to avoid the evil dark underworld of arbitration whereby consumers never win and corporations can do whatever they want. That’s the part that isn’t true. And if consumers really want to get rid of arbitration, the way to do it is by forcing companies to engage in the process. Companies came up with this boneheaded arbitration idea to avoid class actions. While that problem was pretty much resolved, they did not foresee what would happen if every.single.person filed an individual claim. Until that’s tried, I can’t be bothered to listen to people that say that consumer arbitration is absolutely bad for consumers.

      • Do you think that arbitration is actually better than individual litigation (not considering class actions) for the consumer in any ways? You talk about the effect of everyone actually utilizing their dispute options whenever they had a claim (which I agree would be better than giving up and doing nothing). Is that easier to do because of arbitration; have consumers gained any newfound advantages as a result of forced arbitration? Or is it just more of a consolation that consumer can at least do that, even though their dispute capabilities have been curtailed overall?

  6. Arbitration seems like a bad idea for consumers but a great deal for corporations. Why give up your rights under the legal systems? Arbitrators are not bound by the same laws as the court system. Arbitrator decisions are final. If you get a bad ruling you have lost the right to appeal.

    I have seen agreements that let the corporation choose the Arbitrator. Corporations choose Arbitrators that tend to rule in their favor. This puts the consumer at a disadvantage.

    You have more rights under the legal system. Even if you opted out, you can still choose Arbitration if you want to later on.

    • This is a prime example of someone who doesn’t know what he is talking about. It’s just the same one liners and no basis for saying anything. Have you personally been involved in an arbitration? Did it not work out for you? Have you been a party to a class action? Did you recover millions of dollars? And do you know that arbitrations against banks like Chase have an automatic right of a 3 panel arbitrator appeal? Of course you didn’t know this. You, like most, just regurgitate the same tag lines. If I was a conspiracy theorist, I would venture to say that companies want consumers to think that arbitration is bad so that they don’t engage in the process and let every issue goes. Fact is that arbitration is here today and will be here tomorrow. Being mad at it won’t get you or any consumer closer to getting justice when a corporation screws you over.

      • This made my heart warm 🙂

        Please do continue to call out ignorance that those that repeat tired, and factually dubious talking points.

        Cheers

      • You have such a condescending attitude just because I disagree with you. I have discussed this topic of arbitration with several lawyers and a judge. You may find this hard to believe but a lot of educated people disagree with you. Just because you are also a lawyer does not mean that you are right and everyone else is a “someone who doesn’t know what he is talking about”.

        While Chase may allow an appeal that is not the case in most arbitration. Most of the time an Arbitrators arbitrary decision is final. No appeal.

        Companies force arbitration clauses in their contract because it helps them. They do not do it for the benefit of consumers.

        Arbitration should be an option, not forced on consumers.

        I prefer to retain my full legal rights under the justice system rather than signing them away to an Arbitrator. I disagree with you. Rather than attacking you personally, as you did to me, I will leave it at that. Perhaps you will learn something about how to argue a point on its merits.

        • Here’s more condescending talk but I do it out of love.

          “You discussed it with several lawyers and a judge?” How is that relevant? I do this every day, all day. One claim after another. My thinking I’m always right attitude comes from experience, not from anecdotes, and not because I’m a condescending person, though the combination serves me well when I’m fighting corporate lawyers. Who would you want representing you in a consumer arbitration claim? A nice guy or a someone who has a healthy disregard for authority?

          “While Chase may allow an appeal that is not the case in most arbitration.” Obviously, this post is about Chase. But did you know that Citi also provides a right to appeal? Do you know that Barclays does as well? That’s three major banks. If you want to get upset about a change in arbitration, get upset when they get rid of this.

          “Companies force arbitration clauses in their contract because it helps them. They do not do it for the benefit of consumers.” Companies thought it benefited them. Then I came along and said, you want to dance? Let’s do it. They don’t feel the same anymore when they see Bachuwa Law is representing them. Again, do you want someone weak and feeble representing you or do you want some arrogance when you’re going up against them?

          “Arbitration should be an option, not forced on consumers.” So opt out. You have your option.

          “I prefer to retain my full legal rights under the justice system rather than signing them away to an Arbitrator.” The justice system? Funny how the grass is suddenly greener. The court system has its flaws too. And what do you plan on doing with your full legal rights if your mythical class action doesn’t get past the summary judgment stage or if the class isn’t certified? Is one of those several lawyers going to represent you on an individual basis? Let me save you the suspense and say no, they won’t. From there, you’ll go to small claims which arbitration or not, is a right that is available to you.

          “Rather than attacking you personally, as you did to me, I will leave it at that.” I’m attacked personally all the time. It’s even in the article. Nothing you can say about me personally changes the facts. And you still took some shots but I’m not offended.

          “Perhaps you will learn something about how to argue a point on its merits.” Speaking of personal attacks, what about this line? And I just argued the merits of your comment, point by point. I await your response.

  7. Hey, you are learning. You actually responded to my points instead of just attacking me.

    “You discussed it with several lawyers and a judge?” Relevant because it points out to your readers that other lawyers in the field have different points of view.

    This post is not just about Chase. In your opening statement you made this a broader issue,“as a consumer arbitration attorney that has beaten, in arbitration, banks like Citi … and telecom companies like Verizon among others. So my post was about arbitration in general, not just Chase.

    In my profession I deal with a lot of attorneys. And no, I would not want someone like you representing me or my company.

    “Perhaps you will learn something about how to argue a point on its merits.” If you consider this a personal attack, you have a thin skin. It was a polite suggestion. And, it did get you to actually respond to some issues instead of just attacking me.

    • LOL, you’re something else. You can’t even get past yourself to see how condescending you are. Good luck with your class action against Chase that will never happen. Hope one of those several lawyers gets you a huge pay day.

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