BofA Reaches Settlement In Arbitration Lawsuit

As part of a tentative settlement agreement in a long-running lawsuit, Bank of America Corp. has agreed to drop the mandatory-arbitration clauses and class-action bans from all of its consumer and small-business credit card agreements beginning next year, Philadelphia-based law firm Berger & Montague P.C. yesterday announced. BofA in August said it was ending its mandatory-arbitration policy (CardLine, 8/14). The settlement calls for the issuer to eliminate all arbitration clauses beginning in May through at least late 2013. BofA also agreed as part of the settlement to stop enforcing its existing arbitration clauses against cardholders immediately. JPMorgan Chase & Co., which last month reached a similar agreement in the same lawsuit, also says it plans to end mandatory arbitration (CardLine, 11/24). The settlements stem from a 2005 class-action lawsuit accusing BofA, Chase, Capital One Financial Corp., Citigroup Inc., Discover Financial Services, HSBC North America Holdings Inc. and others of violating antitrust violations by conspiring to require cardholders to resolve their disputes with credit card companies through out-of-court arbitration proceedings. The recent settlements with BofA and Chase are significant because the issuers no longer have the option to enforce mandatory arbitration, Merrill G. Davidoff, a Berger & Montague attorney, tells CardLine. “Although certain issuers said they plan to end arbitration, tens of millions of customers’ credit card statements still contain these clauses requiring arbitration of disputes. But beginning next year, BofA and Chase can no longer avail themselves of those clauses,” he says. BofA and Chase deny any wrongdoing. Cap One, Citi, Discover and HSBC remain defendants in the case.