Herrera Praises BofA Decision to Drop Credit Card Arbitration Mandate

City Attorney’s ongoing litigation against anti-consumer ‘arbitration mills’ includes a Bank of America Subsidiary

SAN FRANCISCO (August 13, 2009) — City Attorney Dennis Herrera today praised a decision by Bank of America Corp. to drop a requirement that consumers with disputes over their credit card debt enter into binding arbitration. The change will enable consumers to file civil lawsuits against the bank to allege unfair or illegal treatment. Bank of America, the nation’s largest bank, is the first major institution of its kind to announce it is ending its use of mandatory arbitration.

Herrera filed litigation in March 2008 against the National Arbitration Forum and FIA Card Services, a Bank of America subsidiary, for unfair and unlawful business practices that virtually assure lenders prevail over credit cardholders in binding arbitration proceedings. Industry statistics themselves demonstrated that consumers lost in approximately 99.8 percent of arbitrations.

Today’s Bank of America decision follows an announcement last month by the National Arbitration Forum that it would cease handling consumer credit card arbitration matters. While two parties targeted in Herrera’s lawsuit have now voluntarily addressed some of the case’s injunctive objectives, the litigation remains active in pursuit of financial penalties and other relief that may be deemed necessary.

City Attorney Herrera issued the following statement in response to Bank of America’s decision:

“Bank of America has made a positive decision that will help restore fairness for consumers, and hopefully influence other creditors to follow suit. It’s also a positive development for my own lawsuit, because one of our defendants — FIA Card Services — is a Bank of America subsidiary. Mandatory and binding arbitration has led to far too much abuse, to the point in which consumers are statistically guaranteed to lose their disputes with credit card companies. In most cases, consumers are subject to excessive attorneys’ fees and arbitration costs to boot. It is unfair, and I’m hopeful that responsible financial institutions will take a hard look at their own practices, and perhaps consider their exposure to lawsuits like mine.”

More information about the case, People of the State of California v. National Arbitration Forum, Inc.; FIA Card Services, N.A.; et al. (S.F. Superior Court No. 473-569, filed March 24, 2008), is available on the City Attorney’s Web site at https://www.sfcityattorney.org.