Bank of America and its subsidiary, FIA, this week settled a three-year lawsuit brought against them by San Francisco City Attorney Dennis Herrera for allegedly forcing consumers to use arbitration when credit card disputes arose, and then engaging in practices throughout the arbitration process that tipped the scales in favor of the bank.
Although arbitration is supposed to be as neutral as a court proceeding, it was determined that in the cases brought before the National Arbitration Forum (NAF, the company consumers were required by Bank of America and FIA to use), NAF found in favor of consumers in just 30 cases out of 18,000.
Although they have not admitted wrong-doing, the banks have agreed to pay the City of San Francisco $5 million in fines. A spokesperson for Bank of America announced in 2009, a year after San Francisco City Attorney Herrera filed the lawsuit, that it would no longer require consumers to use binding arbitration rather than litigation.
The settlement leaves open the option for victims to bring a class action suit against the banks.
The case is People of the State of California v. National Arbitration Forum, 473569, California Superior Court, County of San Francisco.
-Sheril Stanford, JD