Bank to cease using credit card debt arbitration
A major bank has decided to discontinue using third-party arbiters to settle credit card debt disputes.
Bank of America will no longer turn to binding arbitration as a way to settle disagreements between it and the company’s customers. According to reports, Bank of America is the first major bank to withdraw from using third-party arbiters.
Bank of America spokeswoman Shirley Norton said that although the bank maintains that arbitration is a fair process, its customers did not agree. As a result, the bank decided to make a change.
Many credit card issuers will include mandatory arbitration clauses in agreements, which suspend a consumer’s right to have their credit card debt disputes settled in court. Those clauses have been the subject of quite a few court actions lately, the first involving the attorney general of Minnesota and the National Arbitration Forum, which is the largest credit card debt arbiter in the country.
Attorney General Lori Swanson filed suit against the NAF, claiming the firm’s impartiality was in question. The suit alleged the NAF had financial ties to the debt collection industry. The suit was settled with the NAF agreeing to discontinue taking arbitration cases. However, three class-action lawsuits were recently filed against the NAF.
Due to the settlement between the NAF and Swanson, the American Arbitration Association also decided to pull away from credit card debt arbitration cases.