B of A Drops Forced Arbitration

Last week, Bank of America did at least one thing right by consumers when they announced that they would no longer enforce the forced arbitration clauses in their credit card and bank account contracts.

Bank of America is the first major bank to drop forced arbitration, which denies cardholders their day in court by requiring them to settle disputes through bank-chosen private arbitrators.  Forced arbitration stacks the deck against consumers and prevents justice, as we have explained in previous posts.  Just last month, the National Arbitration Forum, the largest arbitration company in the country, responded to a  lawsuit from the Minnesota Attorney General by agreeing to leave the consumer arbitration business entirely.   Slowly but surely, the tide is turning against forced arbitration.

While we welcome these developments, they represent decisions by individual companies.  Consumers will not be safe from the abuses that result from the forced arbitration clauses that are still almost universal in contracts for credit cards, cell phone service, and nursing home care until they are prohibited.  One of the many reasons that we support the Obama administration’s legislative proposal for a Consumer Financial Protection Agency is that it authorizes, and even encourages, the new agency to prohibit forced arbitration in consumer contracts.

But there is also a more direct way to end forced arbitration.  As Fair Arbitration NOW, a coalition of which AFFIL is a member, points out, Congress can “protect all Americans by passing the Arbitration Fairness Act, a bill that would prohibit the enforcement of forced arbitration clauses in consumer, employment, and franchisee contracts,” thus ensuring that consumers are given their day in court.

(Photo: (michelle))