by Matt Stannard

“What is the robbing of a bank,” Bertolt Brecht’s character Macheath asks in Threepenny Opera, compared “to the founding of a bank?” What harm can an individual bank robber do, compared to what a bank–particularly a large one–can do?

Banks can do more damage than other big institutions, because financial asymmetry is the core of private banking. Banking for profit makes no sense without it. And because financial asymmetry results in awful consequences for the weaker party, successful banking for profit requires legal asymmetry too. Boilerplate and adhesion contracts can be effective tools for securing that asymmetry.

But history tells us that asymmetry only gets you so far. That’s why, in spite of Wells Fargo having had some early initial success using an arbitration clause to defer the legal consequences of unambiguous fraud, I’m predicting that the ploy has run its course–that not only will courts stop buying it, but that its continued deployment, successful or not, will sink the bank’s effort to clean up its public image.

If you aren’t abreast of this: Wells Fargo was recently caught having opened 2 million fake accounts in their customers’ names. The bank was fined a paltry $185 million, fired 5,300 of its employees, and tossed $5 million back to its customers. Now the bank wants a federal court to dismiss a class-action lawsuit by customers so defrauded, and their motion argues that customers gave up the right to sue for anything when agreeing to the arbitration clause contained in the bank’s complex and dickish customer agreements. In other words, Wells Fargo argues that when customers signed up for their non-fraudulent accounts, they gave up the right to sue for things like having their signatures forged in the opening of fraudulent accounts. What’s more, that argument has already worked for the bank: Among other instances, last year Wells Fargo got Ninth Circuit Court Judge Vince Chhabria to buy it in September 2015, also in a case arising from the bank opening up additional accounts for customers without permission (after this year’s settlement over the 2 million fraudulent accounts, that case was reopened and joined with a similar suit being filed in that district).

Michael Hiltzik’s LA Times piece is the best reading on this absurd, semi-successful legal strategy. I like the article because Hiltzik is sensitive to both the ethics and optics of Wells Fargo’s incredibly condescending attitude towards its customers:.

Nothing demonstrates that more than the bank’s insistence on forcing the victims of its vast fake-account scam into binding arbitration, a system in which customers are at an overwhelming disadvantage . . . the San Francisco-based bank has succeeded in getting several judges to toss fraud lawsuits over the bogus accounts by asserting that, even though the accounts are fake, they stem from legitimate accounts the victims opened, in which they agreed to submit any future disputes with the bank to an arbitrator . . . [to get] a flavor of just how abusive the Wells Fargo arbitration strategy is . . . [California resident Shahriar] Jabbari had opened savings and checking accounts with the bank in 2011, but within two years discovered that he had seven more that he hadn’t authorized. Soon enough, he was getting dunning notices from collection agencies for unpaid fees on those accounts, some of which had been opened with manifestly forged signatures or even no signatures at all. [Kaylee] Heffelfinger’s experience was similar. She opened a checking and a savings account with Wells Fargo in March 2012, the lawsuit says. Wells employees started opening bogus accounts in her name even before that, starting in January. She ended up with seven accounts, some opened with forged signatures and fake Social Security numbers. Wells Fargo demanded in its defense that the case go to arbitration, noting that its arbitration clause was exceedingly broad: Anyone who became a Wells Fargo customer was agreeing to boilerplate in their customer agreements that covered any dispute with the bank whatsoever, including “claims based on broken promises or contracts, torts, or other wrongful actions.”

Wells Fargo’s legal argument isolates the singular decision to open an initial account (which requires agreeing to arbitration) and goes on to argue that the fraudulent opening of an additional account is covered by the same arbitration clause. It’s pretty outrageous that any court anywhere has allowed this to happen, deferring to a membrane of an argument that carries such awful policy implications and whose outcome can only be inequity to any individual plaintiff. The continued use of the already abusive tactic of forced arbitration to dodge fraudulent behavior threatens to unravel the entire shaky regime of forced arbitration altogether, either via regulatory changes or a quick dip in its litigatory success rate. Even if such regulations spark lengthy court battles of their own, that’s money the banks have to spend on legal fees while their public ethos sinks to lower lows. 

That’s why I think Zane Christensen, the Utah attorney representing plaintiffs in the class action at federal court in Utah, is correct in asserting that the tactic has run its course and that courts will soon see the horrendous implications of allowing it. If judges have gone along with it thus far, they’ve done so for two reasons: (1) a desire for “judicial economy” that often overrides concerns for justice, and (2) the classism of many judges, their unwillingness or inability to see the asymmetry between big banks and ordinary people as a question of equity under law. Irrespective of that, I think the jig is up.

I could be wrong. It may be that nothing can truly convince these particular business entities to behave. After all, banks still racially redline certain areas (Wells Fargo has to pay $2.5 million to 1000 African-American and Latino residents in Baltimore for doing so in 2012), making mortgages and automobile loans inaccessible or abusively expensive to people of color. One bank has even been caught reverse redlining–disproportionately giving people of color increased access to their s***ty deals in order to charge them higher interest rates and fees. Perhaps, like the President-Elect, big private banks will just keep running around doing really repugnant, often racist, always classist things, everybody gets outraged, but nobody’s able to stop them.

But I think I’m right. There’s a lot of political anger floating freely about these days–residual frustration from the elections and a growing sense that materially powerful entities truly can get away with anything–and I wouldn’t want to be a big bank right now. With sufficient financial clout, cities can even step in where the feds refuse to go. Los Angeles just dumped Wells Fargo over consumer abuse. The L.A. city council also asked “the city attorney’s office to draft an ordinance that would amend the city’s responsible banking ordinance to include more protections for whistle-blowers who report suspected illegal bank activity to authorities.” That’s a big deal because, although Santa Cruz County’s decision last year to dump five criminal banks carried a lot of symbolic value, L.A. carries considerably more financial weight. It’s even more important because if enough cities and counties got together, they really could disempower big banks–culminating, as Saqib Bhatti of the Roosevelt Institute hopes, in the creation of municipal public banks, providing even further incentive for private financial institutions to actually change their terms and practices.

If I’m wrong, and Wells Fargo continues to prevail by arguing that fraud is covered by a boilerplate arbitration clause, I promise to open an account there in your name.

Matt Stannard is policy director at Commonomics USA and previously served on the Public Banking Institute’s board of directors.