Nov. 20 (Bloomberg) -- JPMorgan Chase & Co.’s credit-card contracts will no longer require disputes to be settled through arbitration, a practice that lawmakers said was biased against cardholders, to help settle an antitrust lawsuit.

Lenders including Bank of America, Citigroup Inc., Discover Financial Services and Capital One Financial Corp. “secretly met or consulted on some 30 occasions for the purpose of requiring their cardholders to arbitrate all disputes,” said a statement from Berger & Montague PC, a law firm that filed the class action in Manhattan federal court.

JPMorgan, the biggest U.S. card lender, stopped using arbitrators in July, spokesman Paul Hartwick said today in an e-mail before Berger & Montague announced the settlement. The revised policy at the New York-based bank “reflects our commitment to clearer and simpler communication with our customers,” Hartwick wrote. The bank denied any wrongdoing, according to Philadelphia-based Berger & Montague.

JPMorgan is the only defendant that agreed to settle and will drop the arbitration clause for at least 3½ years starting in 2010, Merrill Davidoff, an attorney with the law firm, said in an interview. American Express Co. was accused of antitrust violations in another complaint that’s still pending, he said.

Bank of America Corp. ended the arbitration requirement in August. Hartwick and Citigroup’s Samuel Wang declined to comment on the lawsuit. Messages left with representatives of AmEx, Bank of America, Discover, Capital One and HSBC Holdings Plc, also named as a defendant, weren’t immediately returned. The settlement requires approval by the court.

Arbitration Required

The case stems from the use of mandatory arbitration by credit-card issuers to resolve payment disputes. Customers had to waive their right to go to court and agree to arbitration in advance to open an account.

A congressional report in July said the National Arbitration Forum, a Minneapolis-based company that handled most debt arbitrations in the U.S., misled consumers and hid ties to collection firms. Companies won almost all the time, according to the American Arbitration Association.

The National Arbitration Forum agreed July 17 to settle a lawsuit filed by Minnesota Attorney General Lori Swanson that bars the firm from taking on new consumer debt-collection disputes. Swanson asked Congress to add consumer protections to federal law governing arbitrations.

No Replacement

JPMorgan won’t replace the arbitration clause with any other language, such as a class-action waiver, in card-member agreements that will be sent to customers in the first quarter of 2010, Hartwick said.

The decision is a “win for consumers who previously had no recourse because of rigged, forced arbitration proceedings,” the American Association for Justice said in a statement. The Washington-based group was formerly known as the Association of Trial Lawyers of America.

The case is Ross v. Bank of America, 05-cv-07116; In Re Currency Conversion Fee Antitrust Litigation, MDL No. 1409, U.S. District Court for the Southern District of New York (Manhattan).

To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net

Last Updated: November 20, 2009 16:37 EST