From personal experience, this much I know…
If a company even INQUIRES about your credit history, that alone can have an adverse effect on your credit rating. Or if you have what some lenders consider “too many” credit cards, even if you pay them all on time.
So make no mistake, what Wells Fargo did in opening fake bank accounts and credit cards in their customers’ names without their knowledge, let alone permission is, in the cleaned-up-for-a-family-publication words of former Vice President Joe Biden, a “big freaking deal.”
This is fraud on a massive scale with significant potential harm to the victims that, individually, is almost impossible to quantify even if the victims want to make a big stink about it.
The problem is, buried in the fine print of Wells Fargo’s agreements for opening a bank account or obtaining a credit card, you are banned from suing them.
It’s called a “forced arbitration” clause. And even if you somehow miraculously notice it, the average person has absolutely no idea whatsoever what the heck it means. Well, it means you can’t sue the bank that fraudulently opened a checking account or credit card in your name without your knowledge or permission.
Here’s the clause Wells Fargo slips into your contract (shouting “caps” in the original)…
“YOU UNDERSTAND AND AGREE THAT YOU AND THE BANK ARE WAIVING THE RIGHT TO A JURY TRIAL OR TRIAL BEFORE A JUDGE IN A PUBLIC COURT.”
Instead, you are forced to try to resolve your dispute through a process administered, not by a court of law, but by something called the American Arbitration Association (AAA) – not to be confused with the American Automobile Association (AAA).
And just to put in perspective how problematic these clauses are, consider this constitutional right every American enjoys thanks to the 7th Amendment…
“In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved…”
Now, as a conservative I fully support the right of private individuals to freely and voluntarily contract with each other for all manner of services and products. That includes opposition to so-called “minimum wage” laws.
But to require someone to sign away a CONSTITUTIONAL RIGHT (now I’m shouting!) for the privilege of opening a checking account or obtaining a Visa card is obscene. Especially when your rights are taken away from you by a fine-print clause in a 7,927-word (yes, I counted them for you) “adhesion contract.”
What’s an “adhesion contract”? Glad you asked…
As defined by Wikipedia, an adhesion contract “is a contract between two parties, where the terms and conditions of the contract are set by one of the parties, and the other party has little or no ability to negotiate more favorable terms and is thus placed in a ‘take it or leave it’ position.”
If you’re a little guy, adhesion contracts suck because you have absolutely zero ability to negotiate the terms, including these “forced arbitration” clauses that force you to give up one of your cherished constitutional rights.
And if you think just understanding this particular issue is tough and makes your eyes glaze over, can you imagine the disadvantage you’d be under if you wanted to take your injury for having a bank account or credit card opened in your name without your knowledge or permission through the complicated, bank-controlled process of “arbitration”?
Forget David and Goliath. This is more like Ant vs. T-Rex!
Indeed, under the circumstances the only real hope you have of obtaining a little justice is to join together with others just like you who have similarly been injured and pull your resources together to fight the banking dinosaur as a group. As Caesar put it in the new Planet of the Apes movies, “Apes Together Strong.”
But then there’s this kicker, also buried in the fine print of Wells Fargo’s adhesion contract…
“NEITHER YOU NOR THE BANK SHALL BE ENTITLED TO JOIN OR CONSOLIDATE DISPUTES BY OR AGAINST OTHERS IN ANY ARBITRATION, OR TO INCLUDE IN ANY ARBITRATION ANY DISPUTE AS A REPRESENTATIVE OR MEMBER OF A CLASS…”
Whoa, whoa, WHOA!
It’s one thing to tell you can’t exercise your 7th Amendment right to a trial by jury, but to tell you you have no right to team up with other victims to fight a wrong even in the forced arbitration process? Why not just give up your right to your first-born male child while you’re at it?
Now, I’m no big-government liberal. I believe the federal government should only be allowed to do what it is authorized to do by the Constitution. And I agree 100% with Craig Biddle of The Objective Standard who wrote…
“If America is ever again to be the free republic it is supposed to be, advocates of liberty must adopt as their fundamental political principle the moral truth that the only proper purpose of government is to protect individual rights.”
And since Wells Fargo – and other ginormous corporations who have “forced arbitration” clauses buried in the fine print of their own adhesion contracts – is infringing upon the constitutional rights of Americans, then a conservative case can be made that it’s proper for the government to step in and protect our individual rights.
Unfortunately, Congress – in the pockets of the Big Bank swamp monster – has chosen to go AWOL on this issue. Which has left a vacuum that the despised (rightfully so) Consumer Financial Protection Bureau (CFPB) has stepped in to fill.
For the record, I don’t like the CFPB. I think Congress should eliminate it. But until it does, CFPB isn’t so much a problem as a reality. And like the proverbial broken clock that gets it right twice a day, CFPB has gotten it right on this issue.
Late last month CFPB issued a rule declaring that banks can no longer strip you of your right to band together with other injured victims and have your day in court. Not in a closed arbitration process 100% controlled by the banks. In a court of law as protected by your 7th Amendment rights.
And although the full rule itself is 775 pages long – because, well, that’s what government bureaucracies do (see, “The Hitchhiker’s Guide to the Galaxy”) – the entire new provision protecting your rights can be found in two short sentences that banks must now accept (think of it as our OWN adhesion clause)…
“A provider shall ensure that any such pre-dispute arbitration agreement contains the following provision: ‘We agree that neither we nor anyone else will rely on this agreement to stop you from being a part of a class action case in court. You may file a class action in court or you may be a member of a class action filed by someone else.’”
Note that the new rule doesn’t ban, as some opponents are falsely alleging, “forced arbitration” clauses.
It simply says that if/when a group of victims who have been similarly harmed want to pull together to fight a corporate behemoth protected by rarely read and barely understood fine-print “forced arbitration” clauses in an adhesion contract – well, that’s their God-given right as U.S. citizens and the banks can’t strip them of it.
Again, don’t get me wrong. I detest abuses of class action lawsuits. With a passion. I’ve championed lawsuit abuse reform legislation for two decades.
But class action lawsuits do have a rightful and legitimate place in American jurisprudence in some cases – like when a giant national bank like Wells Fargo fraudulently opens an estimated 1.5 MILLION fake checking accounts and issues an estimated 565,000 fake credit cards to customers without their knowledge or permission.
To wrap this up…
Some Republicans in Congress – having punted this issue and kicked the can down the road to the point where the CFPB was allowed to step in – now want to use the “Congressional Review Act” (CRA) to overturn this reasonable, common-sense rule to protect your constitutional rights. And they have 60 legislative days to do so before the rule takes effect.
If Republicans in Congress don’t like this rule, fine. But the proper role of government – including Congress – is to protect our rights. If they want to fulfill that responsibility differently from the CFPB, fine. Then do it.
But if Members of Congress won’t take responsibility for protecting your rights and my rights from the abuses of giant corporations like Wells Fargo, then the least they should do is what they’ve already done and are best at…
Mr. Muth is president of Citizen Outreach and publisher of Nevada News & Views