Here's how it was explained in the 85-page PDF USAA recently sent out to its members:

Changes and clarifications to the Depository Agreement And Disclosures
Arbitration — page 51
We added an option for binding arbitration to resolve disputes about your account. Either you or USAA Federal Savings Bank may elect to resolve a dispite through binding arbitration. By keeping your account and continuing to transact on the account, you are agreeing to the use of binding arbitration for any disputes in accordance with this provision. PLEASE REVIEW THIS PROVISION CAREFULLY.

Action you may choose to take
If you do not want to be subject to binding arbitration, you must close your account.

Interesting that USAA is making arbitration mandatory as other banks are backing away from the practice.

RELATED:
What Is Mandatory Binding Arbitration?
Arbitration Firm Rules Against Consumers 95% Of The Time
Forced Arbitration: As Fair As A Sucker Punch

Yes, that Bank of America is actually allowing credit card, loan, and banking customers to file lawsuits. They aren't doing it due to a sudden change of heart, of course. National Arbitration Forum, which handled their disputes, is leaving the credit card business entirely after being punched in the face sued by the Minnesota Attorney General. Consumers are not terribly fond of arbitration.

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. Supporters of arbitration say the process can be faster and less costly than going to court.

"While the bank thinks arbitration is a very fair way to go, customers do not," Bank of America spokeswoman Shirley Norton said. "It is in everyone's best interest to change it. We're hoping we'll be able to resolve more disputes directly with our customers."

Norton said the bank will review consumer cases already in arbitration on a case-by-case basis.

That's one more big company down...maybe now even more will follow their lead.

Bank of America ends arbitration of card disputes [Reuters] (Thanks, Phil!)

PREVIOUSLY:
Arbitration May Be Dead, But Courts Offer Imperfect Alternative
Credit Card Arbitration Cabal Implodes
Another Arbitration Firm Pulls Out Of Credit Card Arbitration
Minnesota Attorney General Punches National Arbitration Forum In The Face

(Photos: PJLewis and mrkathika)

NAF provided arbitration services for Bank of America, JP Morgan Chase, Citigroup, Discover Card, and American Express.

Minnesota's Attorney General, Lori Swanson, is using the win to put pressure on another arbitration company that's currently trying to build up its credit card arbitration business:

Swanson says she is also sending a letter to the American Arbitration Association, an NAF competitor that has been trying to build its credit-card arbitration business. The letter, which makes no allegations of bias, asks the AAA to exit the business because most consumers don't realize they must use arbitration, rather than going through the courts, as part of credit-card contracts, the AG says. "I am asking the AAA to show some leadership," Swanson says. AAA General Counsel Eric Tuchmann says he wasn't prepared to comment on the AG's proposal until he saw a copy of the letter.

"Big Arbitration Firm Pulls Out of Credit Card Business"

RELATED
"Minnesota Attorney General Punches National Arbitration Forum In The Face"

[b]eginning before late 1998 or early 1999, Defendants began communicating with each other and their co conspirators concerning the imposition and use of mandatory arbitration clauses.” After preliminary meetings and communications, the banks formed an “Arbitration Coalition” to recruit other credit card issuers into using mandatory arbitration clauses. Over the next four years, the Arbitration Coalition held more meetings, shared plans for the adoption of arbitration clauses, and spun off additional working groups. Ultimately, “Defendants jointly forced unwilling and unaware cardholders to accept arbitration clauses and class action prohibitions on a ‘take-it-or-leave-it basis’ through the joint exercise of immense market power.”

The cardholders argue that the banks’ collusion violated the antitrust laws. According to Plaintiffs-Appellants, the banks conspired in order “to immunize themselves from economic responsibility for antitrust and consumer protection violations, and to reap supra-competitive profits from their cardholders.” The cardholders also contend that the alleged collusion produced several market effects, including the creation of a “non-price trade advantage over cardholders” and the removal of any economic incentive for the banks to comply with antitrust and other laws, thereby shifting the risk and cost of their non-compliance to cardholders. The collusion is also alleged to have resulted in an increase in dispute related costs to individual cardholders (including monitoring the banks’ conduct and seeking relief through costly individual arbitrations), the removal of all non-arbitration credit cards from the market, thereby depriving the cardholders of meaningful choice in the area of credit card services, and a diminution in the overall quality of credit services offered to consumers.

The Complaint sets forth two antitrust claims against the banks. The first claim alleges a conspiracy to impose mandatory arbitration clauses in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The second claim alleges that the banks participated in a group boycott by refusing to issue cards to individuals who did not agree to arbitration, also in violation of Section 1

Sex Assault Suit Vs. Halliburton Killed [ABC] (Thanks to Philip!)
RELATED: Mandatory Binding Arbitration Means Alleged Halliburton Rapists Could Go Free

Sorey says when he went in, he told a befuddled cashier that he didn't think that the arbitration notice was enforceable, that anyway he wasn't agreeing to it, and, "I need a taquito and a coffee." He says he sat down, watched some traffic, and ate his taquito. "I didn't choke, I didn't burn myself, and I didn't sue 'em," he reports.

Eat Burger, Waive Right to Sue [Mother Jones]
(Photo: Dan Sorey)

Thank you Ben! Now how do I respond to these comments ... they are the ones I usually get.

First: We did use a licensed realtor.

Two: We did not understand the true ramifications of arbitration, or it's unfairness. No one who has not been caught in this snare does. We did not know that almost always big business wins. We thought it was like, OK kids lets sit down and not argue and fix this situation. We did not know the system was rigged. We did not understand the builders were repeat clients and the arbitrators meal tickets. No one understands arbitration companies are just the middle men. You still have to put on a trial and have all the costs associated: witnesses, subpoenas, expert testimony you even have to pay for the room to hold the arbitration in... We would not have had to pay a judge as we did an arbitrator or room rent or the astronomical fees charged by arbitration companies. Our arbitration fees alone were $9300. dollars. That does not include going to the kangaroo court where the rules of law no longer apply behind close doors. That was nearly $30,000 dollars...

3) We did have an inspector. Without invasive testing, he could not have know what was behind the freshly paint walls. Ask you builder if you can do a little destructive testing before you buy the house and see how far you get. 4) We did get legal advice. We are on our third set of lawyers. One advised us to go into foreclosure and bankruptcy and get on with our lives because in the state of Texas we would never receive any ration of fairness or justice. The builder's lawyers know how to eat up your retainer before your check clears. People make these comments because they still just do not understand. The public cannot accept that this can go on the this county and they have no recourse. The court house doors are blocked. Those who run from trial prove their guilt. If arbitration is so fair why is it mandatory? Thank you for trying to help us all and informing the public. Jordan Fogal

PREVIOUSLY: Tremont Homes Sells Rotten Lemon, Provokes Victimized Homebuyer Into Five-Year Consumer Crusade

My husband Bob and I are senior citizens. Like so many others, we lost our home to foreclosure... not because of sub-prime loans... but because of defective, substandard housing - protected by an arbitration clause. We bought a new house so we wouldn't have to worry about repairs. The first night my husband decided to try out the Jacuzzi tub on the third floor. When he pulled out the stopper, 100 gallons of water crashed though the ceiling. We had been in our new home all of six hours... all I could do was scream as I watched the ceiling fall on our dining room table, water pouring down the walls, filling up the chandelier, and splashing on the new hardwood floors, then finally flooding the garage below..."

After that, we found out we were trapped, as our investment attacked itself and us. All the upstairs lights blew; and when we tried to replace the bulbs, they broke off their rusted bases. The windows were installed upside down, and with the first rains came the leaks. The shower wall fell out, and a disgusting smell permeated our home. Mold grew up out the carpet; and black, spider web tentacles crawled up our walls. We pleaded with our builder for 29 months to please fix our house, but they had taken out insurance against any responsibility - they had inserted an arbitration clause in our earnest money contract. They had also knowingly committed fraud by covering up the defects before they sold to us.

The arbitration clause kept us hostage, since we could not afford over 150,000 dollars to repair our new home. The builders told us that if we continued to complain, their lawyers would take care of us in arbitration. Tremont Homes / Stature Construction, our builder, filed on us with AAA, the American Arbitration Association.

We knew they would not have threatened us with arbitration if it was fair. Come to find out, they had already entered into a contractual agreement with AAA; they were partners. All the burden of proof was on us. We endured 8 months of deadlines and demands while our builder never complied. When we told AAA we couldn't afford the costs, this demented collection agency emailed us blank forms for our credit card information so they could charge the costs as they accrued.

Our case was dismissed from arbitration because the arbitrator was not paid by us, or the builder. After nearly 8 months of torment, I thought that I could now go to court. We filed a suit, charging the builder with fraud. His attorneys dragged us through 10 hearings before the judge ordered us to return to arbitration and said that we must file a counter claim {which is much more expensive than a regular claim}. The judge said, no matter what his personal feelings, the legislature favored arbitration; and he could not rule from the bench. This time we were ordered to pay. We had to paid $9300.00 to AAA and the arbitrator, and an additional $1687 dollars before the arbitrator would issue her verdict, thirty days later by mail... She did not even have to face us. We were granted the ruling of fraud, because of the builder's own sworn testimony, used in other cases against their subcontractors, where they used our house as the example of the most defective. All totaled, arbitration cost us in excess of $30,000, not including our legal fees. On October 30, 2006, after four years of anguish, our award was a grand total of $26,088. This did not even reimburse us for the down payment on our home.

Arbitration is like a jail sentence: Your money is taken from you; an agency has complete control over your life. You are bound by legal handcuffs into a secret kangaroo court held behind closed doors, and the rules of law no longer apply. We had 187 documents, a PowerPoint presentation, pictures, witnesses, and expert testimony. The builder walked in laughing, with his attorneys and a little white binder with 37 pages... they didn't even need that.

Arbitration is a demeaning and abhorrent substitute for justice. We were sworn to tell the truth. We do not understand why lying was overlooked in arbitration, or when civil becomes criminal, and why a ruling of fraud doesn't nullify a contract?

Everything is upside down in arbitration; the perpetrator files on the victim. Many victims of arbitration come out in shock; many are under gag orders, referred to as secrecy agreements so they cannot tell what has been done to them. They will only repeat a pat statement... we reached an amicable settlement with our builder... How can arbitration be fair - sending an individual up against a multimillion-dollar corporation?

Read a recent Mother Jones article about Jordan Fogal's story to hear Tremont Homes' side , such as it is.

Now Jordan is on a quest. She stands outside Tremont Homes building sites with lemons and big signs warning prospective homebuyers. She's spread her story through the local papers. She pens scathing articles about the evils of mandatory arbitration, and the layers of bureaucracy and indifference that keep them in place. She's testified before Congress. She still has not received her satisfaction, and will not rest until she does. Because of the terms of her contract, and the absurdly unfair structure of mandatory binding arbitration when applied to consumer disputes, she may not get it until the Federal Arbitration Act is significantly altered to go back to what it was originally meant for, an expedited way for businesses to deal with one another, entities of similar size and complexity. Until then, as long as Tremont keeps making more lemons, that's more fuel for her slingshot.

RELATED: Home Sour Home [Mother Jones]
Written Testimony Submitted by Jordan Fogal To The Subcommittee on Commercial and Administrative Law "Mandatory Binding Arbitration Agreements: Are They Fair For Consumers?" Tuesday, June 12, 2007, 10:30 a.m [judiciary.house.gov]
"ARE YOU NEXT? The Many Levels of Texas Bureaucracy" by Jordan Fogal [Homeowners For Better Building]
Podcast Series: Arbitrating Away The American Dream (Vol 1)
Podcast Series: Arbitrating Away The American Dream (Vol. 2) — "The Stupid People"
Why an Ultra-Conservative Texas Grandmother Doesn't Support the GOP [Alternet]

Pissed? Learn how to support the Arbitration Fairness Act.

Shroyer v. New Cingular Wireless Docket No. 06-55964 [PDF] (Thanks to Fred!)

Parties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side. Indeed, a party can't unilaterally change the terms of a contract; it must obtain the other party's consent before doing so....

...Nor would a party know when to check the website for possible changes to the contract terms without being notified that the contract has been changed and how. Douglas would have had to check the contract every day for possible changes. Without notice, an examination would be fairly cumbersome, as Douglas would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed.

[via CL&P Blog]

What's the deal?

Elizabeth Warren at Credit Slips says,

"The credit card companies keep track of how arbitrators rule, and they can strike those they don't like. Customers don't have a big information base about how the arbitrators ruled in the past, and they end up with whatever arbitrator the companies pick. It is just one more way the deck is stacked against ordinary consumers.

Consider the story of Harvard Law Professor Betsy Bartholet. In her first few cases, she ruled for the credit card companies, and she was asked to do more arbitrations. But once she ruled for a customer, her career as an arbitrator was over. As the CSM reports, sometimes the credit card company didn't even bother to strike her—they just reported that she had a scheduling conflict. As a result, someone who might have listened to a customer's story was always unavailable. Guess who was left to decide the disputes?"

Why does this affect you? Because if you have a credit card you've most likely entered into a mandatory arbitration agreement—meaning that if the credit card company @%$#@$ you, you'll need to use an arbitrator instead of going to court.

Sen. Russ Feingold (D) of Wisconsin and Rep. Hank Johnson (D) of Georgia have proposed legislation that would prohibit mandatory arbitration clauses in consumer agreements. The legislation would not prohibit arbitration, but it would give consumers a choice.

S. 1782 (PDF) [via Credit Slips]
Consumer advocates slam credit-card arbitration [CSM]
(Photo:Getty)