As a veteran, I am proud to have helped protect the freedoms so zealously guarded for us by our Founders. Another guarantor of those liberties is the right to our day in court – one especially vital to today’s servicemembers who are so often taken advantage of by financial institutions.
Today, the right to our day in court is in danger because of actions under consideration by the U.S. Senate on the issue of powerful banks and “forced arbitration.”
James Madison, one of the principal drafters of the Bill of Rights, wrote that “trial by jury in civil cases is as essential to secure the liberty of the people as any one of the pre-existent rights of nature." The Founders saw this right to be heard before a jury of our peers as so vital that they enshrined it in the Seventh Amendment.
This right is not only, in Winston Churchill’s words, “a safeguard from arbitrary perversion of the law,” but also a means to ensure equal access to justice for the powerful and powerless alike, and for citizens to signal and set acceptable standards of conduct in our society.
Why bring this all up now? Because the U.S. Senate is considering legislation to roll back a rule recently finalized by the Consumer Financial Protection Bureau (CFPB) to limit forced arbitration clauses buried deep in consumer financial agreements.
These forced arbitration agreements are found in the fine print of financial agreements signed by tens of millions of everyday Americans with the Wall Street banks, covering everything from credit cards and checking accounts to prepaid cards and payday loans. And they require consumers to take disputes over bank wrongdoing not to courts overseen by judges, but to arbitrators chosen by the financial institutions – under their own rules.
Arbitration hearings are held in private with no public record, no meaningful rules, not even a requirement that arbitrators enforce state and federal laws. And of course, no jury.
Perhaps most significant of all, Big Banks have leveraged arbitration to block class actions suits, where the ability of consumers to band together helps balance the extraordinary legal and financial resources at banks’ disposal.
The Wells Fargo scandals – yes, there’s more than one – offer a prime example of how financial institutions use forced arbitration to rip off consumers.
The bank, with 48 branches in Alaska, opened nearly 6000 of its infamous fake accounts here on the Last Frontier.
A California judge ordered the financial giant to repay customers more than $200 million for manipulating accounts to generate overdraft fees – another activity repeated here.
Recently, nearly a quarter million Wells Fargo car loan customers were dinged for non-payment of insurance policies illegally taken out for them – and almost 25,000 had vehicles repossessed.
Most infuriating, Wells Fargo has been fined millions for foreclosing on servicemembers or repossessing their cars in violation of the Servicemembers Civil Relief Act.
In every case, Wells has used arbitration to shield itself from accountability. Since 2009, only 215 consumers nationwide have filed arbitrations against Wells Fargo – but not one in Alaska. The reason: arbitration is often too expensive for a single consumer with a small claim.
That’s why the CFPB rule is so important – and why the Big Banks’ Washington lobbyists are working overtime to have it overturned. The regulation will ensure all Alaskans retain the right to their day in court as part of class actions—and uphold the Servicemembers Civil Relief Act to protect the legal rights of the men and women fighting for this country.
As Congress considers whether to preserve this critical protection for everyday consumers, and especially our servicemembers, our Alaska Republican Senators, Lisa Murkowski and Dan Sullivan need to remember that equal access to justice is not a Republican or Democratic idea. It is an American right, as old as our Republic itself, and it’s worth fighting for.
Ric Davidge serves as chairman of the Alaska Veterans Foundation