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Court OK’s Class Action Over Banks’ Credit Terms

NEW YORK (CN) - The 2nd Circuit reinstated an antitrust class action challenging the mandatory arbitration clause that major banks include in their credit-card contracts.

The clauses typically require customers to arbitrate disputes and prevent them from filing class actions.

A three-judge panel vacated dismissal of the case, ruling that the plaintiffs had standing because they alleged plausible injuries, including suppressed competition, a reduction in consumer choice and poorer quality credit services. They claimed the banks conspired to limit the options consumers had on credit-card agreements. Banks argued that any lack of choice harmed only the "subjective preference" of cardholders. But the court said this argument mischaracterizes the cardholders' complaint, which alleges that the illegal conspiracy forced them to accept less valuable cards.

"The injuries alleged are present, ongoing harms that continue to affect the credit market as long as customer choice and the quality of credit services offered are artificially suppressed," the court concluded.

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