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Chase is removing the right of cardholders to sue — unless you opt out

Ethan Wolff-Mann
Senior Writer
PARK CITY, UTAH - JANUARY 24: A Chase Sapphire sign hangs along Main Street during the 2019 Sundance Film Festival on January 24, 2019 in Park City, Utah. (Photo by David Becker/Getty Images)

In the past few years, Chase has attained superiority in the credit card industry thanks to generous perks and points that have lured many new cardholders.

But recently, customers have received emails detailing a new user agreement that strips cardholders of the right to sue Chase, should they want to.

The bank is updating almost all of its credit card contracts to include a “binding arbitration” agreement, which requires a customer to settle disputes through arbitration (which essentially prohibits customers from joining together in a class-action suit against the company).

According to Chase, most cards are affected except the AARP cards, based on the bank’s contract with the group.

“With arbitration, you cannot go to court, have a jury trial or initiate or participate in a class action for your dispute(s) with us,” the revised agreement says. “In arbitration, disputes are resolved by an arbitrator, not a judge or jury, and procedures are simpler and more limited than rules applicable in court.”

Binding or forced arbitration provisions are typically favored by the corporate world as they avoid costly class-action lawsuits. Instead of fighting a big group of people, a company can deal with each individually, which is much easier, requires more effort and action from otherwise busy customers, and ultimately less costly. According to the CFPB, class actions are more effective at returning money to harmed consumers, and forced arbitration is typically used to block that.

Chase cards used to have these provisions, but under the terms of a settlement, the company dropped forced arbitration in 2009, along with Bank of America, Capital One, and HSBC. According to a study of forced arbitration by the CFPB in 2015, 15.8% of issuers have arbitration clauses, though this was done when those four large banks did not have the clauses.

A Chase spokesperson told Yahoo Finance, “our experience in Consumer Banking and Auto Finance has been that it’s often faster, easier, and less expensive.”

However, consumer groups reserve a special fury for forced arbitration provisions like this, which effectively declaw the public’s chief recourse against potential bad behavior.

“Often, banks and corporations try to ‘sneak’ arbitration clauses past consumers in a way designed to ensure most people do not understand they’re agreeing to give up their right to go to court,” Public Justice’s website says. According to consumer groups like Public Justice, the process is often tilted towards companies.

Most people don’t realize that they’ve given up the right to sue until it’s too late and they want to, and people who ignore Chase’s notices will automatically give up their rights unless they opt out.

In the agreement, Chase says that customers are allowed to reject the agreement to arbitrate if they notify the bank via mail before Aug. 9, noting the accounts the agreement is to be rejected for. Chase told Yahoo Finance that one letter suffices for multiple accounts, and that there is no online version “to make sure we captured our customers’ preferences accurately.”

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Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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