August 13, 2009
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News: BoA Eliminates Arbitration Clause
Bank of American Corp (BoA) is the first major financial institution to implement a new credit card and loan contract policy that will eliminate the mandatory arbitration clause. Many customers are not aware of the clause which is generally found in the small print. Basically, the clause has prevented consumers from suing banks and requires the process of arbitration to settle any credit card or loan issues with the bank. The new policy will make the bank more vulnerable to lawsuit; however, will eliminate the roadblocks that arbitration companies have recently experienced in the court system. Last month two major debt settlement companies, National Arbitration Forum, St. Louis Park, Minnesota and the American Arbitration Association, New York, NY, have pulled out of the debt settlement business because of allegations of partiality towards the credit card companies.
The new policy will cover Bank of America's credit card accounts, recreational vehicle and marine loans, and bank accounts. The bank plans to negotiate directly with customers to avoid lawsuits and costly legal fees. Although the bank prefers the arbitration clause and maintains it is less costly, the difficulties arbitration companies have faced have slowed down the arbitration process. Under the arbitration clause, Bank of America was able to closely predict settlements costs. The elimination of this clause will make it more difficult to forecast actual costs; however, the move will allow BoA to move forward in settling current credit card and loan disputes.
Most credit card companies have the arbitration clause in their loan terms and conditions. American Express is one exception. Although their contract does not include the clause, they will elect from time to time to turn disputes over to a debt settlement company for arbitration. Other card issuers like JPMorgan Chase, CitiGroup, Discover Financial, and Capital One Financial Corp Services have yet to comment on the policy or state if they expect to follow Bank of America's lead.