Moneybox

Clinton Vows to Save Customers from the Next Wells Fargo. Can She Do That?

Raise your hand if you don’t like trial by jury.

Saul Loeb/AFP/Getty Images

Ripped off by a bank, a used car dealer, or the country’s largest ticket seller? Discriminated against by your employer? You probably forfeited your right to sue when you signed a contract or agreed to online “terms of service.” You’ll have to take your dispute into arbitration, a procedure to resolve conflicts privately that has structural advantages for corporations.

The rise of forced arbitration has been one of the quieter and more substantial corporate victories of the past two decades. As a New York Times investigation showed last year, consumers rarely initiate arbitration—and when they do, they usually lose. Most contracts also outlaw class arbitration, preventing consumers from banding together with their grievances.

Hillary Clinton announced on Monday that if elected, she would try to eliminate forced arbitration in contracts, which she called “fine-print gotchas,” by urging government agencies to enforce their powers and Congress to grant them more.

During a campaign speech in Toledo, Ohio, she cited Wells Fargo’s fake-account scandal as a prime example. “Look at Wells Fargo, really shocking isn’t it?” Clinton told the crowd. “One of the nation’s biggest banks bullying thousands of employees into committing fraud against unsuspecting customers.”

But there was a secondary outrage, Clinton suggested: “When the victims tried to sue, they were shocked to learn there was a provision in very fine print that kept them from going to court to sue the bank.” The bank has struck a $185 million settlement with regulators, and will compensate customers for sham account fees, but has not proposed a way to provide restitution for secondary effects like damaged credit scores.

Contractual arbitration and class-action waivers have been upheld three times by the Supreme Court, which has invalidated state laws that banned the practice. Congressional Republicans have sided with business groups like the U.S. Chamber of Commerce, which has opposed any rule changes. So consumers’ last hope is with Washington’s regulatory agencies.

Last week, the Department of Health and Human Services announced a new rule restricting arbitration clauses in contracts of nursing homes that participate in Medicare or Medicaid. That covers about 1.5 million patients, and is designed to address allegations that nursing homes have been essentially beyond the law when confronted with accusations of abuse.

The issue has also been at the center of a yearslong battle between congressional Republicans, backed by big business, and Democrats, backed by consumer rights groups, over the Consumer Financial Protection Bureau, whose proposed rule to limit mandatory arbitration in some financial contracts received more than 13,000 comments during a public review period that ended in August.

Clinton had previously declared her support of the CFPB’s rule against arbitration agreements. Now, she said Monday, she plans to push back against the practice across the board. According to Reuters, her plan is to call on Congress to empower the Federal Trade Commission, the Federal Communications Commission, and the Department of Labor to restrict the use of arbitration in contracts.

The good news: Clinton is finally putting her weight behind proposals that her former colleagues in the Senate have been pushing for some five years.

The bad news: Those senators have been pushing these ideas for five years, under a Democratic president, with no success.

What changes with Clinton in the White House? Probably nothing. But it’s good to have her talking about “fine print gotchas” regardless.