Do you know what your options are if you have a dispute with your credit card company? If you are like most cardholders, you are limited by arbitration agreements that govern how you can handle problems that come up between you and your bank. A new study from the Consumer Financial Protection Bureau show that these mandatory agreements do not provide cost savings and can actually be harmful to consumers.

How Arbitration Affects Consumers

Mandatory Credit Card Arbitration is a way to settle disputes outside the court system. CFPB found that tens of millions of credit card holders were bound by arbitration clauses. About half of all credit card companies make these agreements a requirement to get a card. But, most consumers do not understand the effects of these sorts of agreements. In a CFPB survey, 75% of respondents did not know whether their cards had mandatory arbitration. And, only seven percent of people who are bound by arbitration clauses realized that this means that they are not allowed to sue their credit card companies.

Between 2010 and 2012, more than 1800 arbitration disputes were filed. Consumers only filed about 600 of these; the balance were filed by credit card issuers against their clients. And, the vast majority of outcomes favored banks and credit card issuers. While about $175,000 in damages and $190,000 in debt forbearance was awarded to consumers, arbitrators ordered consumers to pay over $2.8 million to their lenders.

Additionally, arbitration clauses prevent consumers from participating in class action lawsuits against credit card issuers. CFPB found that credit card companies invoked arbitration clauses in 65% of class action lawsuits to prevent the suits from going forward. Over 32 million consumers are eligible for relief through consumer finance class action suits each year. Suits studied had over $1.1 billion in payments to consumers. When class action suits are blocked, it can come at a substantial cost.

What to Do If You Are Forced Into Arbitration

If you wind up in a situation where you must enter arbitration with your credit card company, take action to protect your finances and your credit score:

  • Get a copy of your credit report before arbitration. This will allow you to check for any errors that should be handled.
  • Make sure that the debt that is being arbitrated hasn’t passed your state’s statute of limitations.
  • Consider getting a lawyer. A lawyer can help you navigate tricky financial waters and negotiate a better outcome.
  • If it looks unlikely that you will win, try to settle. This can save money over going to court.

While many financial laws and agreements favor big business over individuals, you can protect yourself by staying educated about your rights. Talk to Key Credit Repair about how you can protect your credit rating and preserve your financial opportunities. For any additional questions you may have, feel free to contact us at 617-265-7900, or schedule a free consultation below.

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Credit Card Agreement – How to dissect it.

Dissecting Your Credit Card Agreement By Reading The Fine Print
If you’re planning on opening up a new credit card account anytime soon, make sure you’re ready to read every last bit of fine print in the agreement before you sign. Furthermore, you need to make sure you understand all of the terms used in the document to avoid signing up for more than you bargained for. Once you have a firm grasp on the industry terms, you can easily pick through the credit card options to find the best one for your needs.

Annual Percentage Rate

Each type of credit card Credit Card Agreement has an annual percentage rate, or APR, attached to the account. The assigned APR applies to totals that carry over month-to-month and balance transfers from other accounts. Some credit card companies even occasionally adjust the assigned rate according to the transaction type or for promotional periods.

Credit cards may offer either a variable or non-variable APR, depending on your account type. You can expect variable rates to raise or lower on a monthly, quarterly or yearly basis, based on changes to the market. The non-variable rate stays at a stable percentage, despite market changes, unless it is temporarily lowered as an incentive.

You can find the actual APR usually listed in bold right in the fine print, but it’s important to read the surrounding information to find out interest charge details.

Credit Limit

When you open a credit card, there are several limits placed on your account. The information should include exact numbers for the upper limit on spending totals and daily cash advance amounts. Although most accounts will decline purchases above the limit, some just charge a higher fee for exceeding the listed amount. The process for raising the credit limit is also detailed in the agreement paperwork. Therefore, it’s important to initially read the fine print closely, and then store the document in a safe place for later review.

Monthly and Annual Fees

In addition to charging a percentage of the balance as interest, credit cards may have a monthly or annual fee. These fees are often wrapped into the total owed on the account at the end of the indicated billing period. However, you may find that the paperwork tells you how to avoid paying interest on that charge, which could save you hundreds of dollars over the years.

You can usually avoid these additional fees by obtaining a credit card through your bank rather than a standalone finance company. Alternatively, if you keep your account in good standing, you can request to have the fee waived by calling customer service at the beginning of each calendar year.

Purchase Protection

The main benefit of using credit cards for purchases is the satisfaction guarantee placed on each transaction. Credit card companies act as a layer of protection between buyers and sellers. If you purchase a product or service that doesn’t live up to your expectations, and the vendor will not work with you, you can have the charges reversed by the credit card company. In some cases, credit card transactions extend the warranty on the purchased item.

Protecting Yourself

As you carefully read the fine print, keep an eye out for unnecessary charges or unfair terms. Make sure to compare several credit card company’s usage terms and fees to weed out predatory lending institutions. Once you pin down the best option, keep the agreement terms in mind while using your account for payments or purchases to protect your pocketbook, and credit score, from harm.

For additional information, feel free to contact our office at 617-265-7900, or schedule a free consultation below.