By Nate Raymond

NEW YORK, Jan 7 (Reuters) - Three of the largest U.S. credit card issuers headed to trial on Monday to defend accusations that they colluded to force customers to agree to settle disputes through arbitration rather than in class action lawsuits.

American Express Co, Discover Financial Services and Citigroup Inc face the allegations in two antitrust lawsuits filed by customers who had to sign arbitration agreements in order to get credit cards.

U.S. District Judge William Pauley in Manhattan is hearing the cases without a jury.

The trial follows a landmark U.S. Supreme Court decision in 2011. That case involved an AT&T Inc unit, and bolstered corporations' ability to require customers to arbitrate disputes over fees or other issues.

Arbitration puts more costs and burdens on individuals than if they collectively pursued claims in class actions, consumer advocates say.

No damages are being sought in the antitrust lawsuits, which were filed in 2004 and 2005, and consolidated for trial before Pauley in March.

Instead, the plaintiffs are asking the judge to order American Express, Discover and Citigroup to remove arbitration clauses from their cardholder agreements.

The plaintiffs also want an eight-year ban on arbitration clauses by the trio, which had 31.4 percent of outstanding credit card balances in 2011, according to The Nilson Report, a payment card industry newsletter.

In the first day of testimony on Monday, lead plaintiff Robert Ross from Pennsylvania said he did not view arbitration as a "fair venue" for consumers.

"If the average consumer was aware of the costs they'd have to bear in arbitration, they wouldn't do it," Ross said in response to questioning by a lawyer for American Express, Rowan Wilson of Cravath, Swaine & Moore.

Lawyers for the plaintiffs will present evidence that big banks in 28 meetings from 1999 to 2003 discussed how to institute mandatory arbitration clauses, court documents show.

Within three years, all the banks imposed almost identical arbitration clauses that prevented cardholders from pursuing class actions, the plaintiffs claim.

Citigroup, Discover and American Express assert that they adopted the arbitration agreements independently.

They also contend that the plaintiffs have failed to show that arbitration clauses curb competition or cause injury under federal antitrust law.

"We include arbitration in our cardmember agreements because we think that it is an important part of American Express's overall approach to resolving any disputes with its cardmembers quickly and efficiently," American Express representative Marina Hoffmann Norville told Reuters.

Representatives for Discover and Citigroup declined to comment.

Four other banks - JPMorgan Chase & Co, Bank of America Corp, HSBC Holdings PLC and Capital One Financial Corp - settled claims in one of the lawsuits against them in 2010 by removing the arbitration clauses from their cardholder agreements for 3-1/2 years.

Those banks also agreed to pay the plaintiffs' lawyers $2.35 million in fees and expenses.

Following those settlements, credit card loans outstanding subject to arbitration clauses plunged from 95.1 percent at the end of 2009 to 48 percent a year later, according to a paper released in November by Peter Rutledge of University of Georgia School of Law and Christopher Drahozal at University of Kansas School of Law.

The settlements with the four banks are set to expire later this year, allowing them to again mandate arbitration.

The cases in the U.S. District for the Southern District of New York are Ross v. Bank of America, N.A., et al., 05-07116, and Ross v. American Express Company, 04-5723.

For the plaintiffs: Merrill Davidoff and Charles Goodwin, Berger & Montague; and Christopher Burke, Scott + Scott.

For American Express: Evan Chesler, Rowan Wilson and Gary Bornstein, Cravath, Swaine & Moore.

For Discover: Robert Sperling, Ronald Betman, Elizabeth Papez and Luke Connelly, Winston & Strawn.

For Citigroup: David Graham, Theodore Scarborough, Eric Grush and David Giardina, Sidley Austin.

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