Back in 2015, Wells Fargo got sued by Los Angeles city for unethical behavior in their conduct of running customers’ accounts, after it was found out that their employees, stretching back to 2011, had been secretly opening accounts without their customers ‘ approval, making transactions through these accounts without their knowledge and even passing normal charges associated with these transactions. The unauthorized accounts included 1,534,380 accounts for deposits, which had accrued a total of $2million in fines for unsuspecting customers. 565,443 accounts had been opened as credit card accounts, of which 14000 of them had accrued $403,145 in credit fines. It was said that employees, under pressure to meet sales targets, had resorted to faking account openings by the said customers.
A successful class suit resulted in $200 million pay out by Wells Fargo to pay both fines and customers.
In September, one of America’s major credit reporting firms, Equifax, suffered a data breach that was said to have potentially affected about 145.5 million customers. The breach was said to have occurred between May-July this year and led to unauthorized access to customer data that included; Client names, their social security numbers, birth dates, physical addresses and driving license number information. This breach led to over 70+ class action lawsuits.
On Tuesday, the Vice president Mike Pence, broke 50-50 vote tie in the senate that could open the doors to giving powers to financial institutions to act as bandits and law unto themselves if situations like the above occur. A rule by the CFRB (the consumer financial protection bureau), that had sought to bar financial institutions from shutting down class action suits using arbitration was voted out by the vice president voting against the CFRB. The act could also potentially render the CFRB, which has played a key role in most class suits, a toothless organization. Voting was mostly along partisan lines with all Democrat senators voting in support of the rule while all but two Republican senators (South Carolina’s Lindsay Graham and Louisiana’s John Kennedy) voter against the rule.
The senators who voted against the rule said that it would bring an end to lawyers getting huge lawsuit payments and would reverse the trend of consumers getting huge pay outs while at the same time still engaging in arbitration to resolve financial disputes with financial institutions. They said that arbitration had wonderfully worked for customers and that it had awarded customers higher payouts than those they get individually from class suits. They also found arbitration faster with better results. These sentiments were also shared with the US Chamber of commerce Chief Executive Officer and president.
These sentiments are skewed due to the fact that arbitration generally favors the financial institution since they are the bigger player than an individual customer, class suits also favor those clients who may not have the financial muscle to take on huge corporate in court. The bill is set to take effect in March if signed into law by president Trump in what could turn the financial and in particular banking industry into a bandit industry where the big financial institutions do wrong and piss on the sheriff’s boots. God save America.