On Thursday, Bank of America said that it will no longer require customers to settle disputes using third-party arbitration companies.
The change applies to disputes involving credit card debt, as well as auto loans and similar products, according to the bank’s spokeswoman Betty Riess.
Mandatory arbitration clauses are often included in fine print of consumer contracts, including those for credit cards and mobile phones.
These clauses stipulate that customers waive their right to bring any dispute to court and that it would instead be settled by an arbitration firm. However, consumer advocates have long argued that this practice is unfair and biased toward banks.
Last month, Minnesota Attorney General Lori Swanson sued the nation’s largest arbitration company, the National Arbitration Forum, claiming that it misled consumers about its links to to the debt collection industry. As a result, the NAF announced it would no longer arbitrate consumer disputes.
Bank of America explained that its decision to end arbitration for credit card debt disputes was made following customer feedback about the practice.
“We’ve always maintained that arbitration was a very fair process, but we got feedback from our customers that they didn’t feel that way, so we decided to make a change,” the bank’s spokeswoman Shirley Norton told the Associated Press.
It is not yet known if other banks will follow suit. Without these clauses, financial institutions could potentially face higher legal costs from disputes brought to court.
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