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Nine out of 10 Americans want the right to sue their bank in court, and to be able to do it as part of a class action lawsuit. And yet, 70% of the biggest banks in the U.S. have clauses hidden in the fine print of customer contracts that prevent just that.
Support for increased access to legal options to settle banking disputes cut across all demographics—age, gender, race, income, and education—and political persuasions, according to a new survey of over 1,000 people conducted by Pew Charitable Trusts.
Yet when Pew analyzed the policies and practices at the biggest 50 retail banks—including Bank of America, Chase, Wells Fargo and PNC—the research showed a rise in the use of “gotcha” mandatory agreements that force consumers into using alternative dispute resolution forums to settle issues. Between 2013 and 2016, the percentage of banks that imposed mandatory arbitration provisions on clients rose from 59% to 72%, among the 29 banks consistently tracked by Pew. And about 73% of the banks evaluated this year restricted customers from participating in class-action lawsuits.
Limiting the ability of bank customers to sue as a group has a wider impact than forced arbitration agreement because it is cost prohibitive to file individual suits over small amounts, says Thaddeus King, an officer for Pew’s consumer banking project. In fact, only 23% of consumers surveyed by Pew said they’d be willing to take legal action against their banks on an individual basis, with the cost and time being the biggest barriers.
In many cases, customers’ problems with the bank revolve around a small dollar amount. For example, if one of the banks with these class-action waivers in place consistently overcharged its customers on overdraft fees, each affected customer would have to file a lawsuit over a $30 charge to have their day in court.
“People generally do not act on their own,” King says. “Banks will continue to get away with harming consumers because the harm only occurs in small amounts.”
To address the issue, the Consumer Financial Protection Bureau recently proposed a ban on credit card and lending contracts that bar users from participating in class actions. If approved, a rule could take effect as soon as next year, eventually letting millions more people take disputes to court.
The deadline to submit comments on the agency’s rule is ending on Monday, Aug. 22, 2016.