If you have a Chase credit card, there’s about a week left to opt out of an arbitration clause sent to customers starting in late May.
JPMorgan Chase’s policy will make it more difficult for its credit card customers to sue the bank in court. With the changes, cardholders would lose many of their litigation rights and be required to go into private arbitration if they wanted to pursue legal action.
Customers holding the roughly 47 million accounts affected, including the popular Chase Sapphire cards, can opt out of the clause that would make it impossible to file or join a class-action lawsuit. But you have to act fast: The first deadline, Aug. 7, is quickly approaching.
We tapped credit card expert Ben Luthi to find out what this all means for Chase credit card holders and how you can protect yourself.
What exactly is happening?
Starting in May, Chase sent emails to credit card customers with the subject line “Important information regarding changes to your Chase account.” Sure, it sounds mundane enough to ignore or send to the trash. But buried in that correspondence, the U.S.'s largest bank by assets announced a provision that would take away customers’ right to sue the bank or participate in a class-action lawsuit if they believe the bank has wronged them. Instead, they’ll be forced to go into arbitration.
What does that mean? “In an arbitration situation, the bank typically gets to choose the arbitrator, who doesn’t even need a legal background,” Luthi told TODAY. “And there’s little to no chance of appealing if they rule against you.”
The reason Chase can implement this change is due to rulings by the Supreme Court. Beginning in the 1980s, the court started to rewrite the Federal Arbitration Act of 1925 that ultimately allowed companies to force consumers into private arbitration to resolve disputes.
Chase and other banks had these types of arbitration clauses in place before. But in 2009, it agreed to temporarily drop them following a class-action lawsuit that alleged the bank conspired with Capital One, Bank of America, Citigroup, Discover and HBSC to push consumers to arbitration.
When we reached out to Chase, a spokesperson stated that the company is among the final card issuers to reinstate arbitration as other credit card companies already have it their agreements. Indeed, the percentage of major banks with arbitration clauses rose from 59% to 72% from 2013 to 2016, according to a report from Pew Charitable Trusts.
But, at this point, all Chase credit card customers have the chance to opt out of the provision. In several emails — dated May 31 and June 3 — reviewed by TODAY, Chase wrote: “You have the right to reject this agreement to arbitrate if you notify us no later than 8/9/2019," with another mentioning Aug. 10 as a deadline. "You must do so in writing by stating that you reject this agreement to arbitrate and include your name, account number, address and personal signature."
According to Chase, the exact deadline is 60 days from when you received the notice, with the earliest being Aug. 7.
What's the big deal?
According to Chase, the new clause is essentially a choice for customers of arbitration versus joining a class-action lawsuit. And, they say, the average outcome in arbitration is meaningfully better than if they joined a class-action suit, where such a large portion of any settlement would go to the attorney. Plus, nothing prevents a customer from going to small claims court.
“Arbitration is typically faster, more efficient and leads to better outcomes for customers,” Patricia Wexler, chief communications officer at Chase, told TODAY via email.
But Luthi disagrees. “Forced arbitration is one of the worst things a business can do to its customers,” he said. “Especially on the class-action lawsuit side of things.”
In fact, Richard Cordray, the former director of the Consumer Financial Protection Bureau, said the government agency found that in five years of group lawsuits, an average of $220 million was paid to 6.8 million people per year. With arbitration, on average only 16 people per year received less than $100,000. Cordray acknowledged that while average payouts are higher in individual suits, people are less motivated to go through arbitration over small amounts of money. "As one judge noted, 'only a lunatic or a fanatic sues for $30,'" he wrote.
Luthi added, “Chase sent out a notice to customers after it blew up in the media, saying that arbitration is simpler than going to court, which is absolutely true. But it’s also a lot cheaper for the bank and provides a lot less protection for consumers who deserve for corporations to be held accountable when they mess up.”
In a recent example of the benefits of group lawsuits, Equifax announced the terms of its class-action settlement from the data breach that occurred a couple of years ago. Everyone affected can receive 10 years of credit monitoring for free or up to $125 (or more if you can prove the data breach resulted in identity theft of some kind).
“If something similar happens with Chase,” said Luthi, "people who don’t opt out of this provision would likely get much less or nothing at all.”
How to opt out
First, it’s important to note there are a few exceptions to the provision. For example, you may be able to take the bank to small claims court in some instances, and if you have one of Chase’s AARP credit cards or you’re covered under the Military Lending Act, the provision doesn’t apply to you at all.
For everyone else affected by the change, you must send a letter to Chase stating that you reject the agreement to arbitrate. According to Luthi, you don’t need to say anything specific other than that you reject the agreement to arbitrate. But Military Money Manual provided a template:
“Please note that I REJECT the Chase Binding Arbitration Agreement effective (insert applicable date), 2019. Please confirm receipt of this rejection and annotate my account(s) appropriately.”
Below your message, make sure to include the following:
- Name associated with the account(s)
- All of your account numbers with Chase
- Full address
Send the letter to:
JP Morgan Chase
P.O. Box 15298
Wilmington, DE 19850-5298
Do not send it to your local branch or any other address, and don’t try to reject it over the phone or secure message. Only letters sent to that address will do.
Luthi recommends using certified mail, if possible, so you have verification that Chase received the letter by the deadline.
Since deadlines vary by account, Chase strongly suggests checking your original notice for an exact date. If you no longer have it, Luthi recommends sending the opt-out letter immediately to avoid missing the deadline.