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MBNA America Bank, N.A. v. Bibb

A-4087-07T2 (N.J. Super. App. Div. 2009) (Unpublished)

BANKS; CREDIT CARDS; ARBITRATION — Such as with a credit card, a consumer with a line of credit account who receives a notice saying that if he or she continues to use the account, all disputes subject to binding arbitration, is bound by that provision if it was clearly set forth and highlighted in the modified account agreement.

An individual opened a “gold option account” with a bank. This account permitted her to issue checks for goods, services or cash. Several years later, the bank sent her a modified “account agreement” specifically provided that when she used the account, she agreed to its terms. The agreement required binding arbitration before the National Arbitration Forum. The customer never sent a written rejection of the arbitration provisions prior to using her line of credit. She subsequently defaulted on payment and the matter was submitted to arbitration. The arbitrator issued an award in favor of the bank. The customer challenged the validity of the arbitration award, contending that the bank had unilaterally changed the terms and conditions upon which the account was initially opened, and that she never accepted the amendments as they related to binding arbitration.

The lower court upheld the arbitrator’s decision because the agreement was sent to the customer, she received it, and she never formally rejected its terms. It further ruled that she was bound by the terms and conditions of that agreement when she used the account on several occasions after receiving the amendment to the contract. The customer appealed.

The Appellate Division affirmed, holding that an agreement to arbitrate must be read liberally in favor of arbitration because of the favored status afforded arbitration. Here, the Court ruled that it has long been recognized in New Jersey that, in the context of traditional credit cards, a cardholder’s decision to use his or her card provides the requisite assent to the terms of the offer, sufficient to form a valid contract. It likened this type of account to a credit card account. It agreed with the lower court that this account holder had used the account numerous times after her receipt of the amendment. It also noted that the arbitration provisions were clearly set forth and highlighted in the agreement, and thus became part of the parties’ contract.

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