June 28, 2019

Sen. Warren, Rep. García Write JP Morgan Chase's Jamie Dimon to Raise Alarms About His Decision to Reintroduce Forced Arbitration for Credit Card Users

Forced Arbitration Clauses Deny Consumers Who Have Been Cheated the Ability to Hold Banks Accountable

Text of the Letter (PDF)

Washington, DC - United States Senator Elizabeth Warren (D-Mass.) and Representative Jesús "Chuy" García (D-Ill.) today sent a letter to Jamie Dimon, Chief Executive Officer (CEO) and President of JP Morgan Chase, expressing alarm with reports that Chase has decided to reintroduce forced arbitration clauses into their credit card contracts, which make it more difficult for consumers to hold banks accountable for misconduct.

Forced arbitration clauses require consumers to give up their rights to go to court and seek redress for damages they have suffered as a result of unlawful practices by corporations. Instead of going to court, wronged consumers who have signed contracts with forced arbitration clauses must use private arbitration forums, which do not have the same protections as courts and whose proceedings are often secret. As a result, corporations win the overwhelming majority of the cases, and they are able to hide their misconduct from the public. In addition, forced arbitration clauses typically prevent individuals from joining with other consumers in class actions, an extremely important tool for those who cannot afford to go after large banks on their own.

In their letter to Mr. Dimon, Senator Warren and Rep. García outlined the dangers posed by forced arbitration to consumers and criticized the company for reintroducing forced arbitration clauses, which it had removed in 2010 from its credit card agreements in order to settle a lawsuit accusing the company of illegally colluding with other banks to deny consumers their rights to bring claims in court.

"Forced arbitration clauses ban customers who have been cheated from banding together and vindicating their rights in court," wrote the lawmakers. "This practice allows banks and other companies to get away with scamming large numbers of customers out of relatively small amounts of money, because, as one prominent judge has said 'only a lunatic or a fanatic sues for $30'....We write to express our strong concern with reports that Chase has decided to reverse course and to urge you to reconsider your plans to resume exploiting your customers." 

The lawmakers also noted that Chase's statements that arbitration is in the best interest of consumers is belied by virtually all available data on its impact on consumers, and criticized the company for making it difficult for customers to opt out of the forced arbitration clause.

"If Chase really thought that arbitration was in the best interest of its customers, it would give them the choice of whether to use arbitration or go to court-but you are not giving them a choice," the lawmakers continued.

The lawmakers asked Mr. Dimon to answer a series of questions to better understand the company's reasons for reinstating this harmful policy, and its potential impact on consumers, by July 12, 2019.

Senator Warren has been a vocal opponent of credit card companies' use of forced arbitration clauses and other deceptive practices that harm consumers. In August 2017, she sent letters to the CEOs of 16 large financial institutions asking whether they supported or opposed the Consumer Financial Protection Bureau's proposed rule banning companies from using forced arbitration clauses. The responses she received from these CEOs collectively highlighted the positive impact of the rule and the industry's weak and misleading case for reversing the rule using the Congressional Review Act. The Senator has also delivered several speeches on the Senate floor in defense of the rule, which was ultimately overturned by Congressional Republicans using the Congressional Review Act.