Bank of America Corp. has agreed to pay $5 million to settle a dispute with San Francisco’s city attorney over the card issuer’s former use of the National Arbitration Forum to settle cardholder disputes, the two sides announced Aug. 23.
The Charlotte, N.C.-based issuer issued a statement denying any wrongdoing and said both sides agreed to the settlement to avoid costs and uncertainty of further legal action from the suit, which the city filed in March 2008.
“We have also eliminated mandatory arbitration and class-action waiver provisions from consumer and small-business card agreements,” BofA said.
BofA discontinued the use of mandatory arbitration in August 2009. Later that year, it settled a class-action lawsuit originally filed in 2005 over its use of arbitration to settle cardholders’ disputes (
The nation’s largest card issuers for many years relied on the forum to resolve cardholder disputes through out-of-court arbitration proceedings. The 2005 class-action lawsuit accused BofA and other card issuers of violating antitrust laws by conspiring to require cardholders to resolve their disputes via arbitration.
San Francisco’s separate lawsuit alleged that BofA and the forum acted in a “biased, unfair and non-neutral manner in overwhelmingly favoring debt collectors in arbitration proceedings,” the city said at the time it filed its suit.
The causes of the city’s action included alleged unfair and deceptive acts and practices, misleading and false advertising and violations of the California Arbitration Act, Rosenthal Act and the Judicial Council’s ethics standards for neutral arbitrators.
Mandatory-arbitration clauses in credit card agreements that limit cardholders’ rights to settle disputes in court largely have vanished in the last few years, consumer groups say.
The Pew Health Group’s Safe Credit Cards Project said last year that fewer than 10% of cardholder agreements contained a mandatory-arbitration clause compared with 68% that did in 2009 (
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