No Day in Court for Bank Clients

August 2, 2011
Wall Street Journal 

Some small and regional U.S. banks, emboldened by a U.S. Supreme Court ruling in April, are prohibiting unhappy customers from taking their complaints to court or joining class-action lawsuits, instead requiring them to resolve disputes through arbitration. The court ruling said state laws cannot supersede private contracts that require customers to present their complaints individually to an arbitrator. The decision attracted attention from financial firms, saying it helps them resolve disputes fairly for customers and more cleanly than getting tied up in lengthy and costly court cases. Regions Financial Corp., a regional bank based in Birmingham, Ala., last month strengthened the existing mandatory-arbitration provision contained in its deposit accounts. Regions also simplified the language in the provision and moved it to the beginning of the 43-page agreement. At the same time, Regions eliminated a provision that permitted some court actions even while a case was going through arbitration. The bank also extended the mandatory arbitration provision to heirs of a deceased customer. Alan Kaplinsky, a partner at law firm Ballard Spahr LLP in Philadelphia, says he has received many requests from banks and other companies to help them put together mandatory arbitration provisions for consumer contracts. "The Supreme Court opinion has been a wake-up call for a lot of these companies to at least consider" mandatory-arbitration clauses, he says.
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