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Why It’s Getting Tougher to Sue Your Bank


Why It’s Getting Tougher to Sue Your Bank

While America is no doubt a most litigious society, guess who it’s getting harder to sue? Your bank. According to The Pew Charitable Trust, many account agreements restrict the legal recourse available to consumers who have disputes with their banks.

You may not have even been aware of the clauses in contracts that can be hard to find in all the fine print. But often, whether you’re signing on for a credit card, payday loan, or student loan, you give up your right to participate in a group lawsuit if a company breaks the law, or otherwise harms you.

nearly 75% of the banks’ account agreements include clauses that mandate pre-dispute arbitration

In Pew’s latest research of the dispute resolution policies and practices disclosed by the 50 largest retail banks in the U.S., which represent two-thirds of deposits nationwide, they found that nearly 75% of the banks’ account agreements include clauses that mandate pre-dispute arbitration – a private process involving a third-party decision-maker whose decision is largely binding, giving the consumer limited opportunity to appeal. Worse still, it prohibits consumers from seeking remedy in court. Nearly 75% of the banks studied prohibit class-action lawsuits, which allow consumers to band together to challenge the big guns in a case that might not make sense financially or otherwise to bring on their own. Ninety-one percent of the banks also bar consumers from having their disputes heard by a jury rather than a judge. According to Pew, more than 90% of these banks include at least one provision restricting consumer’s dispute resolution options.

Consumers are none too happy. A Pew survey last year found that generally most consumers don’t feel that banks should be allowed to deny them access to the legal system, particularly to have the ability pursue a class-action lawsuit. There is strength in numbers. How else can people put banks too big to fail in check?

Ninety-one percent of the banks also bar consumers from having their disputes heard by a jury rather than a judge.

Almost 90% of consumers polled by Pew said they want to be able to participate in a group lawsuit. But getting what they want may be more than a notion. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act authorizes the Consumer Financial Protection Bureau to limit or ban provisions in account agreements that restrict access to class-action litigation, and the bureau proposed rules in May that would bar financial institutions from denying customers this access.

Pew urges the CFPB to get on with finalizing rules that give consumers the ability to choose how they pursue a dispute, as opposed to allowing financial institutions to shut them down by limiting their options.

Pew concludes, “Consumers should be able to pursue legal action against their banks. Class actions, in particular, are a cost-effective dispute resolution option for groups of consumers with small claims. Pew urges the CFPB to move forward expeditiously with these new regulations.”

In the meantime, says Sean Coffey, media and program evaluation manager with the California Reinvestment Coalition, “We’re eagerly waiting to see what happens with the CFPB’s proposal to end forced arbitration. For now, if direct outreach to your bank doesn’t work, airing your concerns via your bank’s social media channels can also be another way to grab their attention. You can also submit a complaint to the CFPB.”

Anonymous   |     |   Comment #1
Almost all, if not all, of the bank agreements I've read have an opt-out clause for arbitration, though you usually have to do it within 30 days. When Gs Bank bought a bank I used it had a clause that also required the opt-out be sent by certified mail with return receipt requested. The agreement says the bank will refund the fees, though in my experience they refunded the full $6.45 rather than just the $6 in fees.  The post office failed to record the delivery and didn't previde a receipt so I was also able to get the $6 refunded from the post office for non-delivery of service.
Anonymous   |     |   Comment #2
Nothing new here, the banks and most CUs have the same disclosure about it for at least a decade going back. If you have been wronged by the bank, your best bet is SEC, FTC, FDIC and a strong lawyer to write demand letters, otherwise we do not stand a chance mediating with the banks and CUs.
Anonymous   |     |   Comment #3
The best recourse is for EVERYONE to periodically send a request to the CFPB with a cc to Sen Liz Warren that predispute arbitration clauses/agreements be barred by regulation for financial institutions and if the parties want to use arbitration they have to agree to same after a dispute has arisen...this would enable both parties (to then) make an informed decision on whether or not to use arbitration.
Zieh Almuete
Zieh Almuete   |     |   Comment #5
Although it may seem impossible to sue the bank, we really need to plan ahead to make sure our loved ones are taken cared of incase of our cash stuck in the bank for a while if we die abruptly. These guys have really helped us plan for that. Better be prepared.