Credit Card Issuers Heading to Court

[Disclosure: Our partners are mentioned below.]

Three of the nation’s largest lenders now face two antitrust lawsuits related to charges of collusion.

American Express, Discover Financial Services and Citigroup are accused of colluding to force customers who brought complaints against them into arbitration rather than class action suits, according to a report from Reuters. The lawsuit claims the point of these activities was to create more costs for consumers — given that arbitration is more expensive to pursue than a traditional lawsuit — and therefore deter consumers from going forward with their complaints. Further, there is a greater burden of proof on complainants in the arbitration process than the court system.

“If the average consumer was aware of the costs they’d have to bear in arbitration, they wouldn’t do it,” lead plaintiff Robert Ross said in response to questioning by a lawyer for American Express, Rowan Wilson of Cravath, Swaine & Moore, according to the news agency.

[Free Resource: Check your credit score and report card for free before applying for a credit card]

These suits were first filed in 2004 and 2005, and no damages are being sought, the report said. Instead, the plaintiffs want courts to force the lenders to remove arbitration as an option in their cardholder agreements.

Plaintiffs in the case plan to unveil evidence they uncovered that big banks held 28 meetings between 1999 and 2003 related to how to put mandatory arbitration clauses into lending agreements, and all three had very similar language in those documents within three years, the report said. Those agreements now prevent cardholders from seeking class action suits against the lenders.

For their part, the lenders contend that they all arrived at the decision to push arbitration and forbid class action independent of one another, the report said. Further, they note that the suits now facing them do not show harm or curb competition as defined by existing U.S. antitrust law.

In 2010, JPMorgan Chase, Bank of America, Capital One and HSBC settled a similar suit against them by removing arbitration clauses for three and a half years, and paying plaintiffs’ lawyers $2.35 million in fees and expenses, the report said. Those settlements will expire later this year.

[Credit Cards: Research and compare credit cards at Credit.com]

Consumers often report incorrect data on their credit card bills and other statements to the federal Consumer Financial Protection Bureau, and these make up a large portion of complaints the agency hears every year.

Image: Andres Rueda, via Flickr