Consumer Law

Bank of America stops arbitration?Another problem with consumer arbitration

By Richard Alderman

You may have read that Bank of America  has decided to stop requiring its customers to arbitrate disputes. Many appluaded this as a victory for consumers, which it is. It also is another example of why consumer arbitration must be prohibited. Bank of America?s decision demonstrates the real problem with consumer arbitration?it is completely controlled by the business. For whatever reason, Bank of America wanted to stop arbitration, and it did. If its customers wanted to continue to arbitrate, they are ou of luck. And no matter how many consumers wanted to stop arbitration, without the bank?s consent, they could not. Talk about a one-sided agreement.

Perhaps, Bank of America felt that with the demise of NAF and AAA as arbitration forums, it would be better to not arbitrate and run the risk that whatever arbitration forum they choose would suffer the same fate, and leave the validity of decisions in jeopardy. Or, maybe the cost of litigating arbitration clauses was too high and the bank wanted a cooling-off period. Or maybe the bank just thought it would be better to litigate. The point is, it doesn?t matter. Regardless of why Bank of America wanted to stop arbitrating,  it had the absolute, unfettered right to change the terms of its contracts with its customers, and terminate the arbitration agreement. Of course, as soon as Bank of America changes its mind, and decides to again arbitrate, all it must do is send another form notice to all of its customers who then be bound by its decision. Not exactly a two-way street.
        The legal theory supporting arbitration is that an arbitration agreement is a voluntary decision of two parties to a contract to waive the right to sue and substitute a binding decision of an arbitrator. The conduct of Bank of America in unilaterally terminating the arbitration agreement it had entered into with its customers shows the true ?voluntary? nature of consumer arbitration.  Arbitration is impose or withdrawn at the whim of the business. Hopefully Congress will enact the Arbitration Fairness Act before Bank of America has a chance to change its mind and re-impose mandatory, pre-dispute binding arbitration on all of its customers.

Full post as published by CL&P Blog on August 17, 2009 (boomark / email).