We’re all careful to try to avoid the dreaded overdraft fee. One wrong calculation and we could find ourselves facing hefty fines that just keep adding up until our next payday.
But the banks have rigged the system against us. They have decided to rearrange the order of our transactions so that our larger withdrawals are processed first, followed by smaller transactions, which then leave us with a negative balance in our checking account. When we do get paid again, the deposit gets applied to the overdraft fee before we can access the rest, meaning the bank is essentially paying itself first with our money.
To call overdraft fees counterproductive is an understatement. In many cases they lead to an endless cycle of debt, and unsurprisingly, it’s usually the people with the lowest income who are made to pay the vast majority of overdraft fees.
To make a bad situation worse, some banks (like Wells Fargo) refuse to settle the dispute in court. Instead, they included an arbitration clause in their customer contract that requires their clients to settle all legal disputes in arbitration – a system that was set up for (and benefits) businesses, rather than individuals.
The Consumer Financial Protection Bureau (CFPB) looked into the benefits and drawbacks for individuals trying to settle their disputes with large businesses in arbitration. The private process consistently benefited big businesses, despite business advocates claiming arbitration provides more benefits to individuals than the court system. The CFPB’s study found that most individuals simply gave up, rather than pursue the dispute in arbitration, especially in cases of small claim amounts, when the potential reward is significantly less than the costs of pursuing arbitration. Even when the individuals did succeed in obtaining an award (less than 10% of those filed) the relief provided was less than 15% of the value of their claim.
Because arbitration is not designed to handle class actions, individuals are forced to duke it out against big businesses on their own – hence the tendency to abandon small claims, which they could pursue if they were give then chance to combine their claims with other plaintiffs with similar grievances. Arbitration is also private, which means even if an individual does manage to beat the odds and obtain an award, other people in the same situation have no way of knowing about it, which puts another layer of restriction on the individuals’ opportunities for obtaining an award, especially if they’re not even aware they have a valid claim.
The CFPB is trying to put a stop to this by implementing a new rule banning banks from forcing their customers into arbitration agreements. It has the support of several U.S. Senators who got together to publish a letter of concern regarding banks’ arbitration agreements with their customers.
While other banks have agreed to settle their customers’ claims from overdraft fees, Wells Fargo continues to hold out against a class of consumers trying to force the bank to resolve the dispute in court, rather than arbitration. Courts have consistently ruled against Wells Fargo, but the bank is getting ready to bring their case before the 11th Circuit Court of Appeals, hoping its judges might be more sympathetic to its case. If they take it all the way to the Supreme Court, we’ll get a final decision on the matter.
Our Oak Brook, Illinois consumer rights private law firm handles individual and class action gift card, data breach, privacy rights, deceptive advertising, predatory lending, unfair debt collection, lemon law and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. The Chicago consumer lawyers at Lubin Austermuehle are proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.
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