Since the economic collapse of 2008, we have begun to see some of the specific ways banks are accelerating the flow of wealth straight upwards. Credit card banks are especially abusive of their wealth and power. They erect massive structures of red tape that most American families don't have the time or money to fight. The banks profit, and American families lose.
Recently, the New York Times reported that the "Collection of Credit Card Debt [by bill collectors on behalf of credit card companies] Is Riddled With Problems." The report detailed instances of consumers being massively overcharged and shoddy records being kept by the banks. One judge in Brooklyn, who presides over a hundred of these claims each day, was quoted as saying that "roughly 90 percent of the credit card lawsuits are flawed and can't prove the person owes the debt." The banks use their size and power to push people into paying exorbitant fees and overpayments. The victims may not know their rights and lack the resources to get the legal counsel they need.
Even worse for American families was the credit card banks' practice known as forced arbitration. In past years, forced arbitration was common practice. If you had a credit card dispute, instead of turning to the courts, the fine print required you to go into arbitration. Both sides were legally bound by the findings of the arbitrator. The entire process took place in private. There was no record of public hearings which would reveal what transpired in the arbitration. There were few public records of the arbitration.
On July 22, 2009, the Domestic Policy Subcommittee (PDF), of which I was the Chairman, held a hearing on arbitration. The hearing disclosed that the outcome of an arbitration had more to do with the arbitrator than the law. Arbitrators who routinely ruled in favor of the banks were sent more cases by the banks. As a result of the 2009 hearing, and more importantly, action by the Minnesota Attorney General, both of the arbitration services that were processing credit card arbitrations on a national basis agreed to stop doing them. My staff followed up with all of the major banks and, over the course of several months, nine of those banks abandoned the practice of using arbitration to collect their credit card debts.
Now that credit card banks are using public courts, we are starting to see the reality which had been hidden by the cloak of arbitration.
The public at large is finally learning about abuses in the credit card banking industry. Over time, the banks may change their policies. But as a consumer, you must learn your rights, and you must insist that your rights are upheld. If you or someone you know is facing a similar situation, contact your Member of Congress. They may be able to help.
The Morning Email helps you start your workday with everything you need to know: breaking news, entertainment and a dash of fun. Learn more