Banks Review Dispute Resolution

Time for Change

Bank of America Corp. announced that it will no longer require its credit card and bank account customers to waive their rights to litigate disputes on their accounts. The mandatory arbitration clauses, a common feature in bank contracts, are coming under scrutiny by Congress and regulators. In Prepare for the Worst, Plan for the Best: Disaster Preparedness and Recovery for Small Businesses (Wiley, second edition, 2008, paperback, 2009), I recommended requesting arbitration as a more cost-effective means of resolving disputed insurance claims that often follow major disasters. If that process fails, you can then consider other options. But I was careful to point out that you should not waive any of your rights, including your right to sue. The controversy around mandatory arbitration for bank account disputes ignited when the Minnesota Attorney General brought suit against National Arbitration Forum, a leading dispute resolution firm, alleging that it had undisclosed ties to the debt collection industry. If this allegation is proven, it indicates that the deck is stacked against consumers and small businesses in mandatory arbitration by an arbiter that is anything but neutral. Perhaps anticipating the outcome of this litigation, banks and credit card companies are reviewing their policies to determine how best to respond. One consumer advocacy group stated that banks will offer fairer, more transparent products terms if they can no longer be shielded by arbitration.