Capital One announced that is will no longer require consumer disputes to be resolved through binding arbitration. According to the Associated Press, Capital One will amend its credit card contracts starting next month.
Bank of America announced last week that it was removing the arbitration provisions from its consumer contracts. MSNBC reports here.
These amendments are subject to court approval.
We've blogged on this issue before with JPMorgan Chase & Co. as well as the National Arbitration Forum altering its practices in light of litigation. In this case, Capital One says that a class action suit naming it as a defendant did not drive the decision to eliminate the mandatory arbitration provision for its consumer contracts.
The AP reports that the class action suit, filed by Berger & Montague, alleges that major banks conspired to require card members to go to arbitration to resolve disputes.
But is this a good move? I'm not taking a position on this, but with current advancements in arbitration (including the company paying for arbitration, and not the consumer), does the argument that arbitration is more expensive (for the consumer) still hold water? Is there empirical evidence that arbitrators rule in favor of the creditors more often than the debtors? I would be interested to know what the empirical evidence suggests.