On Nov. 1, President Donald Trump signed a congressional resolution that can make it virtually impossible for customers to file class-action lawsuits against financial institutions, such as your neighborhood bank or credit card issuer. The signing was done without fanfare; that is, in private, in the White House, without the media present.
Chances are, most consumers will shrug, and why not? Most people get through life without suing a financial institution. Filing a lawsuit against your bank isn’t exactly a rite of passage that most people go through, like buying a house or a car or getting married or having kids or adopting a pet or retiring.
Still, some people might want to sue their bank or credit card issuer or some other financial institution, and arguably, consumers have had more reasons than usual to consider it recently. Maybe you’re worried that you’re a victim of identity theft and peeved over Equifax being unable to prevent hackers from breaching personal information of 145 million customers. Or maybe you were a customer at Wells Fargo who had a fake account made; as you may recall, the bank has admitted to opening 3.5 million fake accounts for very real customers and charged them very real late fees, which may have hurt their very real credit scores.
But, again, a new resolution now makes it harder for consumers to sue financial institutions for bad behavior. That somewhat begs the question: What does this mean going forward?
First: How this came about. This July, the Consumer Financial Protection Bureau put in place a final rule that would have, effective in 2019, banned financial institutions from putting mandatory arbitration clauses in their contracts that can prevent customers from joining class-action lawsuits and instead force them to resolve a disagreement through private mediation rather than a public courthouse.
The new directive from the Trump administration nullifies that rule and thus permits banks, credit card issuers and other financial companies to continue allowing language in contracts that prevents consumers from forming class-action lawsuits.
This is worth considering given that on Nov. 2, the day after this rule was nullified by the Trump administration, Bank of America settled a lawsuit that accused the bank of collecting fees from customers who allowed their checking accounts to stay overdrawn for several days. Bank of America agreed to pay $66.6 million to nearly 6 million Bank of America customers who paid an extended overdraft fee since February 2014 – and will stop charging extended overdraft fees for the next five years. Arguably, there’s a need for class-action lawsuits against financial institutions.