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Bank of America Corp. is abandoning the controversial practice of mandatory arbitration in its consumer businesses, including credit cards.
August 13 -
Major credit card issuers distanced themselves from the controversial and common practice of mandatory arbitration on Wednesday, after a second arbitration firm said it would stop handling consumer debt-collection cases.
July 23 -
Minnesota's blow to the largest consumer credit arbitration company has chipped away at another widely used tool of credit card companies, and may shatter it altogether.
July 21 - Texas
USAA said Monday that it has expanded its membership criteria, potentially doubling its customer base, and made its life insurance and investment products available to members' extended families.
August 12
USAA Federal Savings Bank of San Antonio is embracing the controversial practice of mandatory arbitration — even as other major financial companies have backed away from it or, in the case of Bank of America Corp., renounced it.
USAA, which often outranks other financial institutions in customer satisfaction surveys, has added a "binding arbitration" clause to its member agreements, according to a Friday post on The Consumerist, the blog owned by Consumers Union.
USAA, which provides financial services to 7.2 million members of the U.S. military and their families, has previously allowed its members to opt out of arbitration clauses. But a recent "change of terms" notification eliminated that option.
"By keeping your account and continuing to transact on the account, you are agreeing to the use of binding arbitration for any disputes," it said, according to the scanned document excerpted on The Consumerist. "If you do not want to be subject to binding arbitration, you must close your account."
USAA did not return calls Monday.
The company's decision to start enforcing mandatory arbitration contrasts sharply with a recent industry trend away from the practice, which has long been used by credit card issuers and other financial institutions to settle consumer complaints outside of the court system.
Major credit card issuers started backing away from mandatory arbitration in July, after two large arbitration firms said they would stop handling consumer debt-collection disputes: JPMorgan Chase & Co. stopped filing consumer credit card arbitration claims and said it was "continuing to evaluate the inclusion of an arbitration provision in its consumer contracts." American Express Co. also said it was "reassessing" its options for resolving consumer disputes.
Bank of America said in August that it would abandon the practice completely and eliminate arbitration clauses from its future consumer contracts. "We do believe arbitration is a fair means of resolving consumer disputes, but we decided it was best for our customers and for the company to discontinue the practice in our core consumer businesses," spokeswoman Betty Riess said then.
USAA's decision to start enforcing arbitration clauses in its consumer contracts is thus "counterintuitive," especially in light of its reputation, said Adam Levin, the president of the lead generator Credit.com Inc. "They've always been considered one of the best, in insurance and in banking," he said.
