May 11, 2001
There's nothing subtle about the FleetBoston Financial Corp.'s defense against several consumer class-action suits. The bank recently mailed its credit card customers new cardholder agreements under which the customers agree not to sue the bank individually and not to be a party to any class-action lawsuit. Nothing if not audacious, Fleet made the provision retroactive.
Other large banks are following suit. Citigroup Inc. and MBNA Corp. are also issuing new cardholder agreements that prohibit their customers from suing them, requiring them to submit all disputes to binding arbitration. The new agreements also say consumers are barred from banding together to bring a class-action suit, the traditional way of handling a large number of relatively small claims.
The sweeping actions will, if successful, disqualify millions of consumers from exercising their constitutional right to sue.
Whether the courts will uphold the banks' action is open to question. In a similar case in 1998, a Portland, Ore., judge threw out a similar clause imposed by Bank One Corp.'s First USA Division. Legal scholars say it's unclear whether businesses have the power to prohibit class-action lawsuits by unilaterally altering an agreement.
Fleet's motivation is clear. It's already fighting more than a dozen lawsuits seeking certification as class actions. Most of the pending actions accuse Fleet of misleading customers about interest rates.
In Florida, a federal suit has been filed contesting the retroactive clause, among other issues. And a similar suit was filed recently in state court contesting similar clauses imposed by MBNA and First Union Corp.