Appeals Court Could Overturn Credit Card Dispute Provisions For All Issuers

A case pending in the Fourth Circuit Court of Appeals could upend the enforceability of dispute provisions found in a majority of consumer credit card agreements used by nearly every issuer in the United States today.  The Plaintiff in the Bailey matter asserts that both the arbitration agreement and the class action waiver provisions in her typical credit card contract are not binding agreements because the creditor could modify the terms. The Federal District Court denied the creditor’s motion to arbitrate the case which prompted an interlocutory appeal to the Fourth Circuit Court of Appeals.   

In Bailey, the Plaintiff sued her creditor in Maryland Federal District Court asserting that the creditor should have maintained a Maryland Consumer Lending License.  The creditor filed a motion to compel arbitration in the case and a motion strike Plaintiff’s putative class action allegations, citing the following provision in the credit card agreement with Plaintiff:

"By accepting this Agreement, you agree to this Jury Trial Waiver and Arbitration Clause (“Clause”). This Clause is in question and answer form to make it easier to understand. Even so, this Clause is part of this Agreement and is legally binding. Under this Clause, you waive the right to have any Dispute heard by a judge and jury and you waive the right to participate in a class, representative or private attorney general action regarding any Dispute."