Supreme Court rules in favor of mandatory arbitration


In an 8-1 decision, the Supreme Court has ruled in favor of mandatory arbitration when you do business with a company.

This particular case concerns a subsidiary of a large bank that was doing a con job on those with damaged credit. The subsidiary would send mailers telling subprime customers that they could miraculously qualify for a new credit card.

Here’s the rub: The card came with a limit of $300 but charged initiation fees of almost $300 to limit the subsidiary’s risk. (Unfortunately, this practice was not isolated to one company in the industry.)

As you might imagine, a lawsuit worked its way through the courts over the years and ended up before the Supreme Court. The Supreme Court decision closely mirrors a prior decision concerning AT&T forcing people into arbitration if you did business with them.

So the Supreme Court is saying that businesses are free to impose arbitration on you and control everything about the arbitration process. As a result of that tight control, I told you in the past that the bank wins just a hair under 100% of the time, hence the reason I describe this as a kangaroo court.

The takeaway is this: It’s so important to do business with companies that have good reputations. Do your homework upfront and get a fair and square deal. Then you don’t have to worry about kangaroo courts because hopefully you’ll be treated right in the event of a dispute.

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