Settlement Reached with Four Credit Card Companies to Drop Mandatory Arbitration Clauses

Printer-friendly versionPDF version

10/19/10

Berger & Montague, P.C., on behalf of cardholder classes, has reached tentative settlements with four credit card companies in a four-year-old lawsuit accusing six major credit card banks, and one arbitration provider, of unlawfully colluding to require cardholders to arbitrate disputes, including debt collections, and to preclude cardholders from participating in any class actions.  The settling card companies are Chase, Bank of America, Capital One and HSBC.  All settlements are subject to court approval.  The lawsuit remains pending against Citibank, Discover and the National Arbitration Forum in the United States District Court for the Southern District of New York, asRoss, et al. v. Bank of America, N.A., et al., No. 05-cv-7116 and is a part ofIn re Currency Conversation Fee Antitrust Litigation, MDL No. 1409, in the same court.

Under the tentative settlements, the settling banks will drop their arbitration clauses, which include the class action bans, until at least late 2013.  They will immediately stop enforcing the existing arbitration clauses against cardholders.  They further agree not to “contract, combine or conspire” with any other credit card company concerning arbitration.  Plaintiffs will release these banks from liability for placing the arbitration clause in their cardholder agreements.  They will not be released for claims stemming from past and existing cardholder arbitration proceedings.  Chase, Bank of America, Capital One and HSBC all deny wrongdoing.

The lawsuit accuses Bank of America, Capital One, Chase, Citibank, Discover, HSBC and others of violating the antitrust laws by having secretly met or consulted some 30 times for the purpose of requiring cardholders to arbitrate all disputes with credit card companies.  Arbitration is an out-of-court dispute procedure where cases are heard, often in secret, by private arbitrators.  Consumer advocates criticize credit card arbitration as biased and lacking many safeguards found in court proceedings that protect consumers from over-reaching by businesses.  One purpose of the conspiracy, according to the lawsuit, was to prevent class actions from being brought against these card issuing banks.  The lawsuit was initially dismissed by the district court but subsequently reinstated by the Court of Appeals.  The lawsuit is a class action brought on behalf of the cardholders of the defendant credit card companies.  In June, the National Arbitration Forum was added as a defendant.  

Other counsel for plaintiffs include Coughlin Stoia Geller Rudman & Robbins LLP,  Hulett Harper Stewart LLP and Scott + Scott LLP, all of San Diego, California.

News Source : Settlement Reached with Four Credit Card Companies to Drop Mandatory Arbitration Clauses