Wall Street lobbyists are at it again, and Louisianans need to sit up and pay attention. Big bank lobbyists are pushing Congress to take away our day in court when companies like Wells Fargo and Equifax harm millions of people.
It’s sadly ironic that a big push is coming, as we just celebrated the anniversary of Congress’s passage of the Seventh Amendment to the Constitution, which guarantees us the right to trial by jury in civil cases. For years, wealthy corporations have taken that right away through the fine print — through arbitration clauses and class action waivers. Now the U.S. Consumer Financial Protection Bureau is trying to restore our right to a day in court. Will Congress strip away that right again?
Wells Fargo doesn’t even have branches in Louisiana. And yet the bank created as many as 862 fake bank and credit card accounts in the name of Louisianans who never wanted one. Then when people all over the country tried to band together to challenge the 3.5 million fake accounts nationwide, the bank used the fine print in account agreements to kick them out of court. People were forced to go after the bank individually, one-on-one (and in secret) before a private arbitrator that Wells Fargo agreed to.
Equifax — the giant credit reporting company that holds files on almost all of us — took months to tell people that it had let crooks steal the Social Security numbers, birthdays, and other sensitive information of 143 million Americans. But it was quick to protect itself by burying a forced arbitration clause in the fine print of the agreement for the credit monitoring it offered as a modest step to make up for the damage. Until Equifax was forced to remove it, the fine print prevented people from suing about anything “in any way” related to their relationship with Equifax.
Forced arbitration is a get-out-of-jail card for corporate wrongdoers. No wonder that big corporate lobbyists are out in force to push Congress to block the CFPB’s new rule that restores our day in court when companies violate the law.
Honest companies don’t need to hide behind the fine print. In fact, most small banks and credit unions (including the many excellent community financial institutions here in Louisiana) don’t use forced arbitration clauses. Almost 97 percent of credit unions don’t have arbitration clauses in their credit card contracts. Only 8 percent of banks and credit unions use arbitration in their checking account agreements. But many bigger banks like Wells Fargo do, though even large banks like Capital One (with a large presence in Louisiana) find they can do business without taking away their customers’ day in court.
Lobbyists are claiming that we shouldn’t let people who have been wronged by a big bank choose whether to go to court or use arbitration because consumers do better in arbitration, winning $5,389 on average. But that’s only for the 16 people a year who have unusually big cases and who win. Most people can’t afford to take on a big bank alone, and those who do usually lose: The average person in arbitration actually ends up paying the bank or company $7,725. That’s like saying that a baseball team that has a 33-129 record “wins by 5 runs on average.”
The CFPB’s arbitration rule simply restores our Seventh Amendment rights. That’s why I joined many of my Louisiana colleagues in a letter by 423 law school and college professors in all 50 states urging the Senate not to listen to the Wall Street lobbyists. Main Street companies treat their customers right. Wall Street firms need to do the same, and to face the music when they don’t.
Chris Odinet is the Horatio C. Thompson endowed assistant professor of law at the Southern University Law Center. Email Odinet at firstname.lastname@example.org.