ATLANTA– A federal appeals court ruled Friday that cardholders for BB&T must arbitrate their disputes on the bank’s overdraft procedures instead of litigate, under a mandatory arbitration clause in their customer agreement.
The ruling by the U.S. Court of Appeals for the Eleventh Circuit reverses a district court judge's decision in September that rejected compelling the use of arbitration.
The appeals court agreed with the lower court judge that a portion of the bank’s customer agreement was "unconscionable,” but said that portion, which requires the customer to pay for any dispute, even if the consumer wins, could be eliminated while the rest of the agreement is enforced.
The ruling bars the customers of the North Carolina bank from suing as a group.
The ruling comes as at least nine credit unions are defending themselves against new class action suit making similar claims as in the BB&T case, that is, that they unfairly reordered payments on debit transactions based on the amount of the transaction and not the chronological date.
BB&T said in a statement it is pleased the appeals court "has agreed with our position and recognized that arbitration is a proper and reasonable means to resolve a dispute of this nature."
The plaintiffs' lawyers in the BB&T case argued that forcing customers into arbitration would effectively bar millions from pursuing claims individually because it wouldn't be worth the effort.
More than 40 credit unions and banks have been sued over overdraft fee policies and more than a dozen have settled the cases including PNC Bank, which agreed last week to pay more than $90 million. Many of the institutions do not have arbitration clauses in their customer agreements.