One would assume that consumer protection laws are intended to do just that - protect consumers. But a Supreme Court ruling issued earlier this month seems to indicate otherwise.
According to SmartMoney, the ruling determines that credit card holders bound by a mandatory arbitration clause can't dispute grievances such as charges or fees - even if those charges or fees appear to be in violation of the Credit CARD Act consumer protection reform set into law in 2010.
Why should this matter to the average cardholder? Because binding arbitration clauses are common in credit card agreements, though most consumers don't even realize their card came with one.
These clauses require that credit card users go through the private arbitration process, as opposed to a jury trial, whether a consumer wants to take a credit card issuer to court or a credit issuer wants to take a consumer to court.
Critics of the 8-to-1 vote are concerned that it will set precedence for big banks and credit card issuers to add more restrictive arbitration language in their fine print.
Consumers are at a significant disadvantage when it comes to arbitration because they are less likely to be able to afford a private arbitrator. Furthermore, many believe companies that handle arbitration are biased in favor of credit card issuers because the issuers are regular clients with billions of dollars to spend. Arbitrators will likely never see a consumer again, but a bank may be a regular customer.
Tennessee bankruptcy lawyers note that it's extremely rare for a consumer to win an arbitration case against a large credit card company. In fact, data in California indicates that only 4 percent of cases between 2003 and 2007 were decided in favor of consumers.
So how does this ruling affect the average credit card holder?
Fortunately most of us won't end up going through arbitration. But the more credit card debt we carry, the more likely it becomes. If you're being hounded by debt collection companies on a regular basis for debts you haven't paid in years, you increase the risk of being forced into arbitration. Being a victim of identity theft also increases your chances.
In addition to preventing consumers from suing in court, the ruling also appears to prevent consumers from joining class act lawsuits against their credit card issuer.
It looks like consumer protection today isn't all it's cracked up to be. This is where Tennessee bankruptcy comes into play. Unlike the latest credit card laws, bankruptcy laws are guaranteed to legally protect consumers, not big businesses.
The best way to insulate yourself from damage due to surprise interest rate hikes, unfair fees, or creditor lawsuits is to wean yourself off debt.
Carrying a small balance on a minor number of cards can be beneficial - if you make on-time payments, keep your debt-to-credit ratio low, and pay most or all of your balance off each month. Bankruptcy can put you in a better position to do just that.
When Tennessee bankruptcy lawyer clients stop using credit cards to charge more than they earn, most find that paying other bills like the mortgage and student loans becomes much easier. Look at it as a fresh financial start.
More Blog Entries:
Consumers in Denial about Credit Card Debt May Find Help with Tennessee Bankruptcy: January 11, 2012
Tips for Refreshing Finances in 2012 with Tennessee Bankruptcy: January 1, 2012
A Setback for Credit-Card Users?, by Annamaria Andriotis, SmartMoney
Credit Card Arbitration: What It Is, How It Works, by Amy Buttell Crane, CreditCards.com