Grace Aylmer

Wells Fargo has done it again. And again. And again. This time, instead of creating fake accounts that customers weren’t aware of, or allegedly charging them for auto insurance they didn’t need, Wells Fargo has come for the mom and pop shops of Main Street, USA.

A new class action lawsuit alleges that Wells Fargo has been overcharging small businesses for processing credit card transactions, asserting that Wells’ 63-page Merchant Processing Application included “voluminous legalese that could not possibly be read in its entirety or understood by merchant customers.” The suit claims that various fine print provisions allowed the bank to charge merchants arbitrary fees.

According to the suit, one of the plaintiffs in the case, a small business owner in Charlotte, was charged monthly fees for failing to meet a minimum number of transactions, a minimum he believed had been waived. Another plaintiff, a Pennsylvania small business owner, claims he was charged numerous additional fees including monthly charges even after his business closed. In each case, fine print clauses in the contract were used to justify the imposition of these additional fees.

This case is yet another example of Wells Fargo using fine print to rip off its customers, be they individual consumers or small businesses. In the fake account scandal, Wells continuously used forced arbitration clauses buried in fine print to block class actions challenging its improper behavior. These “rip-off” clauses, commonly found in contracts for a variety of financial products such as banks accounts, credit cards, and loans, ban individuals and small businesses from banding together and challenging wrongdoing in court.

Instead of litigating allegations of fraud and other abusive practices in court before a neutral judge, banks like Wells Fargo can force consumers and small businesses into an individual and secretive arbitration process where the arbitrator who will hear the case is a person chosen by the financial institution. By robbing defrauded customers of their day in court, financial institutions are able to get away with widespread misconduct, because few people have the time or resources to pursue often small dollar claims alone in secret arbitration.

While much of the Wells coverage to date has been heavily focused on defrauded consumers, rip-off clauses harm small businesses as well, making it nearly impossible for small business owners to protest hidden fees, illegal debt collection, and other deceptive or unfair practices. Almost any time a mom and pop store does business with a financial services company, chances are the contract contains a rip-off clause. Nearly all credit card agreements force customers into arbitration if there is a dispute – and credit cards are one of the top three sources of short term capital used by small businesses.

It seems probable that this latest case will end up being another instance in which Wells will attempt to use forced arbitration as a “get out of jail free” card.

Fortunately, a newly released rule from the Consumer Financial Protection Bureau (CFPB) will prohibit banks and lenders that break the law from stripping consumers of the right to join together and hold these institutions accountable in class action lawsuits. Small businesses that use consumer financial products will also be protected by this rule.

That’s the good news.  Now the bad news. The U.S. Chamber of Commerce, the country’s most powerful business lobby, is already pushing Congress to kill the rule and rob consumers of the ability to join together to hold banks accountable in court for wrongdoing. Without the CFPB arbitration rule, Wells Fargo and other financial services companies will continue to pocket billions in ill-gotten gains at the expense of consumers and small businesses. This new rule will restore accountability and transparency, making our financial system stronger and safer for all of us.

The Chamber has a tough choice to make. On the one hand, it has lobbied extensively against limits on rip-off clauses and is now is urging Republicans in Congress to repeal the rule under the Congressional Review Act. On the other, it repeatedly claims to be the voice of small business.

So, when the rubber meets the road, will the Chamber continue lobbying to give a free pass to institutions like Wells Fargo, or will it stand up for the small businesses it claims to represent in its promotional materials? If the Chamber really is the voice of small of business, then this latest case against Wells Fargo presents a perfect opportunity for the Chamber to put its money where its mouth is. The Chamber should take a stand on behalf of mom and pop shops by ceasing to defend the rip-off clauses big banks use to take advantage of small businesses. Otherwise, it’s simply defending corporate greed.

The U.S. Chamber of Commerce wasted no time in opposing the Consumer Financial Protection Bureau’s final arbitration rule that was released Monday, criticizing it as a “brazen” act.

Too often, consumers are blocked by “rip-off clauses”, a fine-print trick that banks and predatory lenders use to evade accountability and conceal illegal behavior by prohibiting individuals and small businesses from having their day in court and forcing them into opaque arbitration proceedings. Under arbitration, the corporation gets to pick the arbiter who will hear the case. As such, arbitration inherently stacks the deck against consumers and small businesses and oftentimes serves as a get-out-of-jail-free card for rogue financial institutions, leaving consumers defrauded and without any other legal recourse.

The newly issued rule would restore consumers’ right to band together in class-action lawsuits against financial firms. Why is this so important? Consider the case of a bank that improperly charges millions of account holders a $50 fee. There are few people who will expend the time and energy necessary to litigate a $50 dispute on their own in arbitration. But this same $50 fee, improperly levied on millions of customers may generate hundreds of millions of dollars in revenue for the bank. Class actions allow consumers to band together and pursue their small dollar claims in court without having to invest time or money. By prohibiting class actions and requiring individual arbitration, rogue banks and other corporations essentially provide themselves with impunity to repeatedly abuse consumers. These giant corporations understand that without the possibility of suing in a class action, the vast majority of consumers will just eat the small fees they may improperly charge.

It should come as no surprise that the rule has the Chamber and its Wall Street friends on red-alert, given that it has the potential cost the industry billions. The Chamber has lobbied extensively against limits on the “rip-off clause,” hoping instead that corporations will be able to continue ripping off consumers with latitude, as we saw in last year’s Wells Fargo fake account scandal. The Wells Fargo case also illustrates another huge advantage of arbitration for corporations. Because arbitration takes place in secret rather than in open court, in the rare instances where a consumer arbitrates a dispute against a corporation, it helps the corporation prevent its alleged misconduct from becoming public, which might trigger investigations by prosecutors or regulatory agencies.

In a joint statement by Lisa Rickard, the president of the U.S. Chamber Institute for Legal Reform (ILR) and David Hirschmann, the president and CEO of the U.S. Chamber Center for Capital Markets Competitiveness, the Chamber asserts its view that the rule has a “complete disregard for the will of Congress, the administration, the American people, and even the courts” and that it ignores “the practical benefits of arbitration, as compared to the court system.”

Sure, the rule may go against the wishes of the current administration, one that is backed by corporate interests who stand to benefit from forced arbitration, but it most certainly does not “disregard” the American people, “or even the courts” for that matter. In fact, it aims to allow people to have their day in court! What the Chamber fails to mention in its scathing critique of the rule, is that more often than not, the “practical benefits” of arbitration fall only upon the big banks and other huge corporations, and not on everyday consumers and small businesses who are too often taken advantage of by corporations intent upon padding their bottom lines through questionable means.

In addition to the Chamber’s statement, the ILR’s Senior Vice President of Legal Reform Policy, Matt Webb, said in an NPR interview that the CFPB’s actions are “an example of an agency largely going rogue, doing the bidding of the plaintiffs’ trial bar and doing something that’s going to be harmful to consumers as well as the business community.”

It seems perplexing, even shocking, that the Chamber is feigning concern for consumers given its history of lobbying on behalf of nearly every industry, often at the expense of average Americans. The Chamber also seems to overlook the fact the CFPB spent three years compiling and analyzing data, resulting in the most comprehensive empirical study ever done on arbitration, requested by lawmakers, demonstrates that forced arbitration effectively wipes out consumer claims.

Not only is the Chamber lobbying against this rule, much like it has lobbied for legislation to restrict individual and small business access to the courts in the past, it also goes to court itself to argue that it should be more difficult for others to exercise this same fundamental right. In fact, the Chamber went to court to argue that others should be denied this same right over 100 times during a recent three year period.  How’s that for hypocrisy?

What’s more, in recent years, the Chamber has involved itself in class action cases on behalf of BP, Goldman Sachs, Corinthian Colleges, and a boatload of other corporate bad actors. Should we still be taking their feigned concern over how this rule effects consumers seriously?

Now, the Chamber has vowed to do whatever it can to keep consumers from having their day in court, whether by suing the bureau once the arbitration rule becomes final  or by lobbying Republicans to repeal the law using the Congressional Rule Act (CRA).

Let’s be clear about what the Chamber’s crusade in favor of “rip-off clauses” is really about: corporate impunity. The Chamber is once again seeking to make it harder for individuals and small businesses to use the civil justice system to hold corporations and financial institutions accountable for wrongdoing. Forced arbitration shields the Chamber’s Wall Street and big business allies from accountability for anti-consumer practices, thereby encouraging unsavory business practices by allowing violations to go unchecked.  The Chamber has shown time and time again that it is neither the voice for small business or consumers, and its unflagging efforts to restrict access to the courts are par for the course. The Chamber may have claimed that the CFPB went rogue, but it and the big banks it represents are the real rogue actors in this story.

Chamber Watch is a project of Public Citizen. If you’d like to learn more about the Chamber, you can always visit us on www.chamberofcommercewatch.org or follow us on Facebook and Twitter.