BofA’s credit card users will now be able to sue the bank for unfair practices

Bank of America Corp said on Tuesday that it is dropping a requirement that forces consumers with disputes on credit cards and other accounts into an arbitration process, which critics say favors card issuers. The new policy applies to credit card, auto, marine and recreational vehicle loans, as well as deposit accounts, and means unhappy consumers will be able to file lawsuits against the bank to address perceived unfair or illegal activity. The bank`s change comes as the Obama administration pushes for a new consumer finance protection agency and as card companies prepare for new limits on rates and fees that take effect next February.

Consumer advocates have faulted the arbitration process, saying it is biased in favor of companies and that consumers often do not realize they are waiving their right to sue when they accept services. Meanwhile, supporters of arbitration say the process can be faster and less costly than going to court. Bank of America spokeswoman Shirley Norton said the bank will review consumer cases already in arbitration on a case-by-case basis.

The change follows announcements last month by two major arbitration firms that they would stop accepting new cases. The American Arbitration Association said it agreed to halt consumer debt collection arbitrations as part of a settlement with Minnesota Attorney General Lori Swanson until new fairness standards were established. According to the National Arbitration Forum estimates, lenders prevail over consumers in 94 % of debt collection arbitrations.

However, it was not immediately clear whether other major card issuers would follow Bank of America's decision. American Express Co and JPMorgan Chase & Co said they are evaluating changes to policies for resolving customer disputes, while Citigroup Inc said it is "continuing to monitor events" involving consumer arbitrations. Besides, Capital One Financial Corp and Discover Financial Services said they have not changed their dispute resolution policies.