Capital One changes credit card contracts terms under lawsuit pressure

Capital One Financial Corp. intends to remove some text from credit card agreements related to customer disputes that required to be handled through binding arbitration rather than the courts.

As spokeswoman Pam Girardo said, new contracts without the mandatory arbitration clause will be sent to all Capital One credit card customers next month.

The case came as a law company that sued major card issuers reported a tentative settlement with Capital One on Thursday over clauses requiring arbitration rather than litigation in disputes including debt collections.

Girardo affirmed McLean, Va.-based Capital One has reached a settlement with the firm Berger & Montague, subject to court approval.

However, she also said the litigation did not drive the decision to drop the arbitration clause. Most disputes with customers are handled through customer service channels, and arbitration "has not been utilized often enough by either our cardholders or Capital One to warrant having it remain in the agreement."

Girardo’s stating that removing the provision "would be the simplest way to pre-empt any confusion or concern that might arise in the future."

Philadalphia-based Berger & Montague said its tentative settlements with Capital One and the two other card issuers leave four remaining defendants in the lawsuit: Citibank, Discover, HSBC and the National Arbitration Forum. The case is a class-action lawsuit brought on behalf of card holders in federal court in New York City.