Planning to sue your credit card company over identity theft? What about taking your cell phone carrier to court? You may need to break out the glasses and read over your contract. If the words "mandatory arbitration" appear, looks like you'll be settling out of court.
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Critics complain mandatory arbitration clauses are often hidden in consumer contracts, and limit consumers' freedom to fight fees and charges in court. The Supreme Court ruled earlier this month in favor of these clauses, setting consumer advocate groups up in arms.
Credit.com's Gerri Detweiler, personal finance expert, said while major banks like Bank of America and Capital One have chosen not to include such clauses in their contracts in recent years, this new ruling may make arbitration clauses more attractive to card issuers. Especially so for third parties and pre-paid card companies.
"If they choose to include these clauses, they are safer," she said. "And it is, in general, a setback for those who feel mandatory arbitration is bad for consumers. For companies it's cheaper, faster and more effective," she said of settling disputes out of court. "And for consumers, it basically means, 'Good luck.'"
Most consumers aren't aware that these clauses exist until there is a problem and they want to take the company to court, Detweiler said.
"You see them, but what can you do?" she said. "If I need a cell phone plan, its not like I have a choice to agree to arbitration or not. I need the plan with the best cell phone service in my area. You have to take it or leave it."