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Topic Title: Lawyers contend banks conspired on binding arbitration
Sun Aug 14, 2005 4:39 pm
Aug. 13, 2005
Suit attacks credit card arbitration On behalf of consumers, 15 class-action lawyers contend banks conspired to divert fee and loan disputes from court.
A lawsuit filed by 15 class-action lawyers from across the United States on behalf of credit card users contends that the nation's largest credit card banks illegally conspired to force their customers to submit loan and fee disputes to arbitration instead of going to court.
The lawsuit, filed Thursday in federal court in Manhattan, alleges that lawyers for the nation's biggest banks met regularly with advisers from Washington and Philadelphia law firms from 1999 to 2003 in a successful "conspiracy" to impose a mandatory arbitration policy on consumers. The outside lawyers are not accused of wrongdoing.
The banks, including JPMorgan Chase & Co., Bank of America Corp., Citibank, MBNA Corp., Capital One Financial Corp., Providian Financial Corp., HSBC Finance Corp. (formerly Household), Discover Bank and their affiliates, together manage more than half a billion credit cards and most of the nation's card loans.
The suit asks the court to stop the practice of requiring arbitration and to pay court costs and unspecified damages. The lawsuit contends that the arbitration services used by major lenders are far more likely to find in favor of the banks than of the consumers. The services are not accused of wrongdoing.
Officials of Chase, the nation's biggest credit card bank, had no immediate comment on the suit pending a review, said David Chamberlin, spokesman for the company's Wilmington-based card services division. A spokeswoman for Citibank said "the allegations have no merit."
The list of lawyers filing the suit, which relies in part on information gathered during previous suits against card lenders since 2000, reads like a Who's Who of prominent plaintiff's lawyers. Lead counsel includes Merrill G. Davidoff of Philadelphia-based Berger & Montague P.C. and Bonny E. Sweeney of Lerach Coughlin Stoia Geller Rudman & Robbins L.L.C., San Diego.
While federal law has become increasingly favorable toward lenders and creditors in recent years, class-action lawyers have stepped up their attacks on what they say are abuses by the consumer lending industry.
Last month, Parkway Corp., of Philadelphia, and New Jersey-based Quality Koi Co. sued Visa and MasterCard, the top credit card brands issued by U.S. banks, over what they said was illegal price-fixing in the fees charged to merchants. Visa and MasterCard have said their pricing policies are legal and fair.
We monitor customer trends for possible violations of Regulation Z and other possible illegal actions.