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