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JPMorgan Chase trying to get credit card customers to go into arbitration to settle disputes

Washington

JPMORGAN Chase is trying to require its credit card customers to go into private arbitration to settle disputes - even if they involve an older account - by re-introducing provisions that it dropped a decade ago.

"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 bank said in notifications sent to customers.

The change, which affects about 47 million accounts, including those for Chase's popular Sapphire cards, reflects a broader effort by Wall Street firms to prevent customers and employees from engaging in class action lawsuits that can result in large settlements and bad publicity. Unlike court cases, arbitration cases do not leave a trail of public documents and they cannot be brought by groups of aggrieved customers.

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To prevent the new individual arbitration agreement from taking effect, customers must object to it in writing by mail by Aug 7, according to the notifications. Customers could still take action in small-claims court.

Patricia Wexler, a JPMorgan spokeswoman, said that the change would affect "nearly all" its credit card customers, except certain service members and holders of its AARP card. She said that arbitration was already "standard practice" for JPMorgan's consumer banking and car loan businesses.

"Data shows that arbitration is often faster, less expensive with better outcomes for our customers," she said.

JPMorgan - the country's largest bank - is far from alone in increasing the use of arbitration clauses. Seventy-two per cent of banks used such clauses in 2016, up from 59 per cent in 2013, according to a report from the Pew Charitable Trusts.

The notifications said that the arbitration agreement would apply not just to the customers' current accounts but "all claims or disputes between you and us", including "any prior account".

The policy change turns back the clock in another way by bringing back the kind of arbitration clauses that the bank and others agreed to temporarily drop in 2009 as part of a class action lawsuit. The bank agreed to remove such provisions for three-and- a-half years, starting in 2010, to settle a lawsuit which alleged that large banks were working together to push customers into arbitration.

Arbitration provisions once seemed unlikely to make a comeback. In 2016, at the tail end of the Obama administration, the Consumer Financial Protection Bureau issued rules that prohibited the inclusion of mandatory arbitration agreements for financial products, including credit cards, because it believed that such provisions deny groups of consumers their day in court.

But the following year, President Donald Trump signed a congressional resolution that overturned those rules. The Office of the Comptroller of the Currency, JPMorgan Chase's primary federal regulator, called it "a victory for consumers and small and mid-size banks" that would help prevent "expensive frivolous lawsuits".

The change also benefited the country's biggest financial institutions. JPMorgan's chief executive Jamie Dimon and the leaders of six other major banks were asked at a congressional hearing in April whether their institutions allowed customers to sue in the courts. Mr Dimon said that the bank's agreements allowed some customers to go to small-claims court. When pressed, he added: "We prefer arbitration."

In the past, class action lawsuits against big banks have helped push them to make changes that help consumers. In 2012, for example, JPMorgan agreed to pay US$110 million to settle a class action lawsuit over its procedures for charging customers overdraft fees. It was among more than a dozen big banks sued by their customers for re-ordering debits from their accounts to maximise the possibility that the accounts would become overdrawn, which would generate more fees.

Under the bank's new rules, such a case would be all but impossible. Each customer with a problem would have to work it out alone, in private, with the bank.

JPMorgan, which said in its annual report that it had 99 million open credit and debit card accounts, did not make a formal announcement about the change. But politicians and customers took notice.

Representative Katie Porter, who sits on the House Financial Services Committee, tweeted a warning to Chase cardholders on Monday, urging them to opt out of the new agreement. "This is wrong," she wrote.

Sara Haji, a lawyer in San Francisco who has a Chase card, contacted friends and family to warn them about the change. Then she tweeted a template that Chase cardholders could use to reject the arbitration agreement.

She said in an interview on Tuesday that she would normally not have paid much attention to an e-mail like the one she received from Chase on May 29. But after she noticed the word "ARBITRATION" - in all capital letters - she read the entire agreement and came away alarmed.

She said she was concerned that arbitration too often favours the company. Customers find themselves "in forums where they don't have rules of evidence that are the same, and no right of appeal," she said. NYT