By SAM ZUCKERMAN

SAN FRANCISCO -- In an effort to slash legal costs and guard against huge jury verdicts, Bank of America said it would impose binding arbitration on consumers who sue the company.

BankAmerica Corp.'s California unit said it has the right to impose arbitration on retail customers under the basic contracts governing deposit and credit card accounts. The bank said arbitration is "faster, less costly, and more reliable" than litigation when a dispute arises with a customer.

San Francisco-based Bank of America and some other banks use arbitration in disputes with commercial customers. But Winslow Christian, the bank's litigation director, said he believed it would be the first to use the procedure with consumers.

Bank Lawyers Pleased

Lawyers representing banks hailed Bank of America's decision as a bold maneuver to cut through the thicket of lawsuits that drains institutions of dollars and resources. They predicted other financial institutions would follow suit.

"The objective is to avoid runaway jury verdicts." said James M. Rockett, a San Francisco lawyer and former assistant general counsel at First In- terstate Bank of California. "I'm sympathetic."

But consumer lawyers cried foul, arguing that arbitration should be agreed to by both parties. They predicted Bank of America's policy would be challenged in court.

"This is nothing more than an effort to snuff out consumers' rights," charged James C. Sturdevant, a San Francisco public interest lawyer.

Consumer advocates stressed that they were particularly worried customers would lose access to internal bank documents and other evidence available in court through the so-called discovery process.

Mr. Christian said he was confident courts would uphold Bank of America's right to use arbitration in consumer disputes. He said the bank has won all of some five cases in which business customers challenged the procedure.

in arbitration, the nonprofit American Arbitration Association appoints an arbitrator from a list acceptable to both the bank and the customer. The arbitrator holds an informal hearing and makes a decision that is binding on both parties. The judgment can't be appealed.

The party initiating the claim pays an administrative fee, which can be recovered if the judgment is favorable.

Bank of America will impose a similar technique, called "judicase to a referee selected in the same manner as an arbitrator. The trial judge would be obliged to adopt the referee's decision in the case, but court appeals would be possible.

Bank of America has about 185 lawsuits pending against it that would be subject to arbitration or judicial reference if they were filed today. Among them is a credit card price-fixing case that could cost the bank hundreds of millions of dollars.

Policy Not Retroactive

Bank of America said it is notifying customers of the arbitration policy immediately. The bank will not try to impose the procedure retroactively in the pending cases but will ask the parties to consent to arbitration, Mr. Christian said.

Mr. Christian could not estimate how much money Bank of America would save by using arbitration. But he noted that use of the technique with commercial customers was a factor in reducing lender-liability claims against the bank from a high of 54 several years ago to about 10 today.

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