THE BLOG
10/13/2014 11:49 am ET Updated Dec 13, 2014

Big Banks Have License to Steal -- You Can Help Stop It

The big banks want an effective license to steal. And they are counting on you to give it to them.

You would never knowingly agree to any such thing, right?

But did you ever wonder what's in the fine-print terms of the contracts that we agree to when applying for a new credit card, opening a new checking account or applying for an automobile loan?

Pretty much no one reads the fine-print terms in those contracts. That's entirely rational. The contract language is almost impossible to decipher, and, even if you do, you can't very well negotiate.

But that doesn't mean the language doesn't have consequences. Buried in the service terms of all kinds of financial products -- as well as everything from cellphones to cable provision, software downloads to rental cars -- are clauses that bar individuals from suing companies that wrong them.

These provisions require individuals to seek redress for wrongdoing not in courts of law -- with the right to have their case heard by a jury, guarantees of due process, and the ability to engage in robust discovery -- but in company-selected arbitration schemes.

Perhaps the worst elements of these contracts are prohibitions on class actions -- preventing consumers from banding together over shared wrongs. For low-dollar grievances, this effectively means there is no remedy available.

No remedy equals no deterrent (except for regulatory enforcement). For enterprises with no sense of shame, no deterrent equals an effective license to steal.

In other words, if you get cheated, there's pretty much nothing you can do.

But we can fix the problem itself. The banks do care about their reputations, so join the campaign to tell the biggest banks using forced arbitration clauses -- JPMorgan Chase, Citigroup, Wells Fargo, US Bancorp and PNC Financial -- to stop.

Would the big banks really trick consumers into agreeing to such unfair contracts? C'mon, of course they would.

And they do.

Preliminary results from a Consumer Financial Protection Bureau (CFPB) study show how widespread are forced arbitration terms in consumer financial contracts:

• Around 80 million credit card holders were subject to arbitration clauses as of the end of 2012.

• Tens of millions of households are subject to arbitration on one or more checking accounts.

• 81 percent of the prepaid cards studied have arbitration clauses.

Moreover, the CFPB found, these provisions foreclose any effective remedy for consumers. Consumers file about 300 arbitration cases related to financial disputes a year, almost none for disputes of less than $1,000.

Do the banks really cheat and defraud their own customers? Heck, we know from the fallout of the Wall Street crash that they mislead and deceive even the biggest, most sophisticated and powerful customers (though you do get to be called a "client" or an "investor" when you're more powerful).

The same big banks will surely take advantage of everyday customers if they get a chance -- that's why they have invented and hidden new fees and charges, used "robosigners" to stipulate falsely that they have carefully reviewed foreclosure documents, and even imposed charges for services not rendered.

If you're a victim of this kind of chicanery, you may well be out of luck, thanks to forced arbitration clauses. Join together with others to sue and demand compensation, and you may well find your case kicked to kangaroo court arbitration systems, where you must arbitrate your own case individually and in secret. Not exactly practical if you and thousands of your fellow customers each have been hit with an unjust $35 fee.

This is happening all the time, as cases are routinely thrown out of court and into the arbitration system -- or simply not filed in the first place, because it's not economically feasible to do so. Example: New York consumers alleged that banks, credit card companies, and debt collectors -- including Citigroup, Bank of America and JP Morgan Chase -- obtained thousands of judgments against debtors through false affidavits, misleading evidence, and other improper litigation tactics. Thanks to an arbitration clause, the courthouse doors were slammed shut. A U.S. district court told the aggrieved consumers that they would have to arbitrate their claims, on an individual basis.

Ultimately to solve this problem, these provisions must be prohibited. The CFPB has authority to issue such a rule for consumer financial products and services, and hopefully will do so as soon as possible.

In the meantime, however, no company should have a license to steal. Join the campaign to tell the big banks to end the use of forced arbitration clauses.