DOW JONES NEWSWIRES
JPMorgan Chase & Co. (JPM) agreed to drop arbitration
clauses from its credit-card agreements as it reached a tentative
settlement of a suit that accused the bank and other lenders of
unlawfully conspiring to require cardholders to resolve disputes
out of court.
The lawsuit accused credit-card units of Chase, Bank of America
Corp. (BAC), Capital One Financial Corp. (COF), Citigroup Inc. (C),
Discover Financial Services (DFS), HSBC Holdings PLC (HSBA.LN, HBC)
and others of violating antitrust laws by secretly consulting each
other numerous times with the aim of requiring cardholders to
arbitrate all disputes, plaintiff law firm Berger & Montague PC
said Friday.
The settlement is the latest setback for arbitration, whose
biggest provider has drawn congressional and regulatory ire because
of New York financier J. Michael Cline's stakes in both leading
arbitrator National Arbitration Forum and big debt collector Axiant
LLC. In July, Minnesota's attorney general alleged the NAF deceived
consumers by not disclosing that potential conflict of
interest.
A Chase spokesman said Friday the bank had stopped sending cases
to arbitration in July and has subsequently decided to remove the
arbitration clauses.
The settlement, if approved, would formalize those decisions, as
Chase agreed to drop its clause for at least 3 1/2 years starting
in 2010, and to immediately stop enforcing existing clauses. Chase
further agreed not to "contract, combine or conspire" with any
other credit-card company concerning arbitration," according to the
statement from Berger & Montague, which is based in
Philadelphia. Chase, which denied any wrongdoing, will also make a
payment toward attorneys' fees and costs.
In exchange, the plaintiffs will release Chase from any
liability stemming from the insertion of its arbitration clause
into its cardholder documents, but not from claims stemming from
actual arbitration.
Shares of JPMorgan were recently up 0.2% to $42.62. The stock is
up 35% this year.
-By Jay Miller, Dow Jones Newswires; 212-416-2355;
jay.miller@dowjones.com