Arbitration No Longer Required By Bank Of America

Many credit card holders may not be aware of it but credit card companies usually place a clause in their credit card statements that basically gives them immunity from litigation if the credit card holder should decide to sue them.Instead, credit card companies opt to use arbitrators for any credit card disagreements with their customers. The customers can also hire arbitrators to fight for them in disputes.

It might be a surprise for credit card holders that they cannot take refuge in the law if they should find that they are not satisfied with their credit card company. However, credit card companies have long had this particular clause in their statements. The reason behind the preference of credit card companies to settle disputes through arbiters is that it costs them much less to do it in this way. According to them, it is also much cheaper for customers as well. However, consumer groups have argued otherwise.

Whatever the case, the argument regarding the use of arbitrators may soon be over. Bank of America, one of the largest credit card companies in the U.S. recently announced their decision to require arbitration for disputes between its credit card holders. The decision is also applicable to its lending and banking customers as well. What this means is that Bank of America may now be vulnerable to lawsuits such as class-action suits.

Shirley Norton of Bank of America said that the change will certainly mean that bank of America will most probably be facing a lot of lawsuits now that arbitration is no longer required. However, she said that the company aims to settle disputes directly with their customers.

“We’ve always maintained that arbitration was a very fair process, but we got feedback from our customers that they didn’t feel that way, so we decided to make a change”, Norton recently said.

Nilson Report publisher David Robertson however says that this recent move by Bank of America may be a direct result of the recent shutdowns of several major arbitration companies and the congressional inquiry that the arbitration industry is now going through.

Recently, National Arbitration Forum of St. Louis Park, Minnesota stopped credit card dispute arbitrations after they were sued by Lori Swanson, the Attorney General of Minnesota. Swanson alleged that the group made violations several violations including deceptive trade practices, false advertising and state consumer fraud. The group denied any wrongdoing on their part but got out of the arbitration industry anyway, saying it was due to legal costs.

After the the National Arbitration Forum stopped doing business, the American Arbitration Association followed suit a few days later. A proposal banning of arbitration clauses is also under consideration in Congress.