Trapped in the Fine Print
Kevin Drum makes note of one of the more appalling practices of credit card companies: writing the fine print of your card agreement such that you can't sue them. In general, those tiny letters at the bottom of your contract state that disputes need to be settled by an outside arbitrator. (What percentage of Americans even know what that means?) And that outside arbitrator is chosen by the credit card company. The results are predictable. As Business Week explained, "Corporations seldom lose. In California, the one state where arbitration results are made public, creditors win 99.8% of the time in NAF cases that are decided by arbitrators."
These arbitrators aren't always particularly neutral. One of the largest -- the National Arbitration Forum -- was bought up in a complicated scheme by hedge fund manager Kevin Cline, who also owns a massive debt collection company. As Drum puts it, "Result: synergy! NAF rules against the consumer and one of Cline's companies collects the debt." Lori Swanson, the attorney general of Minnesota, seems to have used a well-aimed lawsuit to put an end to this project, and NAF recently announced that it wouldn't be taking any new cases. But it's a good reminder that while consumers often don't understand the fine print of this stuff, corporations really, really do, and are pretty good at using it to maximize profits at the expense of customers.
You know, it's almost enough to make one think we need an agency dedicated to protecting us from the fine print and chicanery that goes into some of these financial products...
Photo credit: Bloomberg News Photo .
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