By: Nancy Steadman
Many Americans have experienced issues regarding their checking accounts in recent years, ranging from unexplained or excessive fees to questions about overdraft privilege protection programs. While dispute resolution is a core aspect of good service quality, a new study finds many of the nation's largest institutions do not provide enough options to consumers to dispute checking account issues.
The Pew Safe Checking in the Electronic Age Project released a new report entitled, "Banking on Arbitration: Big Banks, Consumers, and Checking Account Dispute Resolution," which followed the trends of the nation's top 100 largest financial institutions. The findings reveal that of the 92 account agreements Pew was able to obtain from banks, 64 of them placed some form of restrictions on dispute resolution. For example, some carried a mandatory arbitration clause, while others impose class action bans and jury trial waivers. Some financial institutions also placed limits on damages or excessively shortened the statute of limitations for addressing certain infractions.
Mandatory arbitration appears to be the rule
Further, the study found that mandatory arbitration bans were most common among the nation's largest institutions, which require customers with disputes to take their grievances to a third party to decide the matter. In fact, the authors were able to make a correlation with a bank's size and the likelihood that they imposed this clause. Roughly 75 percent of banks do not allow an "opt-out" option for mandatory arbitration.
"A checking account is the most widely used financial product in the United States, and many bank customers become bound by a mandatory arbitration agreement when they open their account," said project director Susan Weinstock. "We found that most consumers were not aware that their right to go to court is often limited if they have a dispute with their bank."
When the study broke down the results by institution, it found that 50 of the nation's largest banks have arbitration clauses, while only 30 of the banks in the second tier carried this rule. Seventy-five percent of banks with this clause also ban class action suits. Further, more than 50 percent also contain provisions that require consumers to waive a trial by jury.
Despite these restriction account contracts, several large-scale financial institutions have settled multimillion dollar lawsuits as of late due to aggressive fee income strategies or manipulative or abusive banking practices.