The big banks continue to earn their reputation. Case in point, the recent scandal involving Wells Fargo, in which the bank was found to have systematically defrauded 1.5 million customers by setting up, without their knowledge or permission, additional lines of credit and accounts in their names. By doing so, the bank was able to rake in millions of dollars in additional fees. Roughly 10,000 small business accounts were affected as well.
As a result, Wells Fargo was forced to pony up $185 million in fines, and its CEO, John G. Stumpf, was hauled in front of a Senate committee and given a stern talking to by Senator Elizabeth Warren and others. Stumpf’s solution to the problem? Fire 5,300 low-level employees. You know, weed out the bad apples.
But evidently, this was a systematic way of padding the bank’s profits dating back to 2005 — before even the financial crisis. So, Wells Fargo had been stealing people’s money for more than a decade, and its CEO didn’t even get fired.
That may not be all that surprising at this point, as some Americans have undoubtedly become numb to the growing list of financial and banking scandals that seem to dominate the news for a day or two, before being conveniently forgotten about. Everyone remembers the financial crisis and housing bubble (though few actually understand it), but what about the Libor scandal, or the rigging of foreign exchange markets? Remember when HSBC was caught laundering money for drug cartels?
Frankly, it’s amazing anyone opens accounts with these institutions anymore. People probably feel that if they do get screwed or scammed, that they would have some sort of legal recourse. That would only make sense.
The problem, though, is that you often don’t. That’s the unfortunate reality for victims of Wells Fargo, in this most recent case, who were defrauded but can’t actually file a lawsuit against the bank. They can initiate arbitration, but that’s something that is fairly rare. And even rarer are the times when the consumers win.
So, why don’t, or why can’t, customers sue when they are screwed or robbed by the big banks, like in the Wells Fargo “fake accounts” case? The answer, as it so often does, lies in the fine print.
Basically, when you sign up for an account, you agree to certain terms and conditions. And, just as you do when you sign up for Facebook or open up iTunes, you gloss over the text and give sign your name. Buried in there, though, is the important piece to this puzzle — most of these contracts make it so that we are agreeing to forfeit our rights to file lawsuits against the organization. Not only that, but they often include provisions that outlaw class arbitration.
Meaning that you and everyone else that was screwed? Yeah, you guys can’t team up to try and take on Goliath in some sort of WWE tag-team battle royale — you have to do so individually. As a recent piece from Slate explains, this leads to a certain level of deck-stacking, or “structural advantages” for corporations like Wells Fargo.
What can you do?
This is why, when you find yourself holding the short end of the stick in situations like this, your hands are tied — legally speaking. You gave up your right to sue, and also gave up your right to collectively take your issues to arbitration. There has been some talk about this on the presidential campaign trail on the part of Hillary Clinton, but you probably shouldn’t hold your breath in hopes that any big changes are going to be pushed through anytime soon.
The question, then, is what can you do to protect yourself and your money?
There’s no sure-fire way to be 100% secure, unfortunately. In most cases, your money is probably perfectly fine in one of the big banks — just so long as you’re paying attention to what’s going on. And that’s really what you need to do to ensure your money is protected: Be vigilant.
If you simply can’t trust Wells Fargo, Chase, Bank of America, etc. anymore, look for smaller, local options. Check out a credit union. There are other options out there. That doesn’t mean that they themselves won’t have a scandal at some point, but with the track record of the big banks? You might be willing to take your chances and go outside of the mainstream options.
But above all, keep an eye on your accounts, and check your credit score. Protect your data, and keep an eye out for anything out of the ordinary. The banks know there is a relatively low level of financial literacy in this country, and they use that to their advantage. By putting a little extra attention and effort toward keeping your finances square, you can keep your money safe.