Another Unfair Mandatory Arbitration Clause Bites The Dust

Another bank with a large presence in Georgia has bowed to pressure from consumers and consumer advocacy groups and abandoned the unfair practice of mandatory arbitration. Bank of America Corp. announced it will stop requiring that disputes with its credit card holders and banking and lending customers be settled by binding arbitration.
As we have written before, many consumers are unaware that card agreements typically include a clause that waives a card holder’s right to sue. Lenders instead use arbitration to go after delinquent accounts and employ arbitrators to fight disputes with their customers. These so called “neutral arbitrators” have been shown to be biased in favor of the large corporations and banks which frequently use their services.
In fact, last month the biggest arbitration group, the National Arbitration Forum in St. Louis Park, Minn., agreed to stop arbitrating credit card disputes after being sued by Minnesota Attorney General Lori Swanson, who alleged violations of state consumer fraud, deceptive trade practices and false advertising laws by hiding financial ties to collection agencies and credit card companies.
Swanson said the group handled more than 214,000 collection claims in 2006. The group had denied wrongdoing but said it got out of the business of arbitrating consumer finance loans because of legal costs.
A few days later the American Arbitration Association said it would stop arbitrating consumer debt collection. A bill is currently before the Congress to ban arbitration clauses from credit card agreements.
Bank of America announced the change covers the company’s credit cards, consumer RV and marine loans, and banking customers.