NEW YORK (Reuters) - A U.S. appeals court reinstated a class-action suit on Friday against a group of banks that force their credit card customers to use arbitration instead of the courts to settle disputes.
The credit cardholders "alleged that the banks (with other co-conspirators, including American Express Co and Wells Fargo & Co) illegally colluded to force the cardholders to accept mandatory arbitration clauses in their cardholder agreements," according to the ruling by the 2nd U.S. Circuit Court of Appeals.
The cardholders argued the banks had violated antitrust laws "by refusing to issue cards to individuals who did not agree to arbitration," according to the decision.
The cardholders want the court to stop the banks from compelling arbitration, prevent them from "continuing their alleged collusion" and invalidate the existing mandatory arbitration clauses.
A lower court judge sided with the banks, which include Bank of America Corp, Discover Financial Services, Capital One Bank, HSBC, JPMorgan Chase & Co and Citigroup Inc, and dismissed the case, saying the cardholders lacked standing.
The panel of three appellate judges disagreed.
"The cardholders have adequately alleged antitrust injuries," it said in its ruling.
"Today's appellate court ruling is not a decision on the merits of the banks' arbitration policies or practices," Citi group spokeswoman Janis Tarter said. "The plaintiffs' allegations, however, are without merit, and we are confident that a court will agree once all the facts are presented."
Bank of America, Capital One, Discover, HSBC and JPMorgan Chase declined comment. The other banks did not immediately return calls seeking comment.
"We're quite happy with the decision," said Charles Goodwin, whose Philadelphia law firm represents the credit cardholders. The cardholders are a large class coming from Pennsylvania, New York, New Jersey and California, he added.
Other banks named in the lawsuit include units of Washington Mutual Inc.
Joe Ridout of the nationwide nonprofit group Consumer Action hailed the ruling, saying: "It's unfair for consumers to have to give up their legal and constitutional rights just to get a credit card."
Additional reporting by Dan Wilchins; Editing by Lisa Von Ahn/Andre Grenon