In the Netherlands a bank got destroyed a few years ago by a single person starting a media campaign for a bank-run. This was done in response to "shady practices" on the mortgage side of the bank.
He got people to withdraw over 600 million from DSB Bank in a few days, which caused the bank to run out of liquidity and forced them to freeze accounts. This meant they lost all trust in the market and needed to ask other banks for emergency financing. All other banks declined (with good reasons, a bank falling apart combined with pending legal action on the mortgage side is a very high risk for them to take).
I can imaging some disgruntled customers going after Wells Fargo in the same way. They have severe legal action pending (which makes them risky for others to save) and have destroyed their image by their reactions to this (which makes it easier to motivate customers to take action). All ingredients that killed DSB are there... The only difference is that DSB was one of the smaller banks and Wells Fargo is huge.
In the Netherlands a bank got destroyed a few years ago by a single person starting a media campaign for a bank-run. This was done in response to "shady practices" on the mortgage side of the bank
Happened here in the UK too. Northern Rock was in trouble but companies get in trouble all the time; what killed it and precipitated a full-blown financial crisis here was certain journalists revelling in the downfall of capitalism from the safety of their state-broadcaster sinecures...
Them going bust is actually a pillar of capitalism. This whole "too big to fail" bullshit coming from business-friendly politicians was just skewing the free market.
Weren't they actually too big to fail, though? I thought that multiple huge American banks failing would've made the recession a ton worse because banks would've failed and some large companies wouldn't have been able to make payroll and it all could've snowballed
The trick is to let them fail, then rapidly sift through the pieces and sell anything off which still has value. Even failing banks have plenty of good loans.
Ordinary deposits with banks should be protected by the government because the general public cannot evaluate the risk of a bank collapsing. There's probably a case for some protection for companies that hold accounts -- although companies should really be aware that by depositing money in a bank, they become lenders to the bank, and they should have the skills to mitigate that risk. Perhaps smaller companies, and accounts specifically holding payroll, should receive greater deposit protection.
You say "ordinary deposits with banks should be protected by the government", and then go on to say something to the effect of 'oh yeah, and these other things which I think are good, but screw big companies, then can get fucked'.
Which seems to translate, at least in my mind, to 'banks should be too big to fail, but only in the ways I like'.
It's not clear, under your scheme, how we would draw the line between companies that "should be aware" of the risks and how they would mitigate them? Do we have to have insurance policies against our bank deposits? But who pays for that?
Maybe I'm not reading with enough goodwill here though. Perhaps by "the government should protect" you mean to say something like 'there should be laws / regulations making it so that banks shonky investment dealings can't affect depositors accounts, at least for some class(es) of depositors' - in which case I agree.
> Which seems to translate, at least in my mind, to 'banks should be too big to fail, but only in the ways I like'.
I didn't say any of that. Banks should never be too big to fail. The only question is which of the bank's account holders should the government preferentially bail out by printing money equivalent to the holders' deposits.
That makes sense. If the government were able to do all of that super fast it might be been fine. I just don't get all of the hate for the bailouts. I know it feel's like to many people the banks sort of "got away with it" but the bailout both stopped any bad effects from failed banks and the government made money off of it so it seems like a win-win for society in my perspective
If it's a win-win, then it should be okay - even good! - for the banks+government to do it again. After all, everyone made money and the economy only almost collapsed, not actually.
Regardless of the actual dollar amounts changed hands, what the US Federal government demonstrated was that risky - even illegal - behavior will be covered and some losses will be covered. It means that next time (and there will be one), we should assume the risks and losses will be even bigger.
But the current system was insufficient to stop the previous failure, too. Wouldn't bailing them out short term and then adding some regulation long term be a sufficient solution?
If the global financial system was built on a blockchain, couldn't we just fork and rollback the bad transactions?
But more seriously, why did the resolution have to be a bailout. Could someone with the authority, and here I mean The Government, because they've got the guns, just tell the banks to rollback the wonky transactions?
When financial catastrophes are "bailed out", the main effect is not the money gained or lost by the involved parties. Rather, the main effect is the inevitable identical-but-larger financial catastrophes that will result when rational bankers compare speculative upsides to presumably bailoutable downsides.
The Boing Boing article basically quotes this Reuters article, so I think the Reuters one should be the one linked as it is the source and is more in-depth:
The article is wrong. Wells fargo says customers gave up their right to sue by signing up for an account, which is far more defendable from a legal point of view.
Unfortunately, this is common practice and it also shows one of the biggest problems of the western world. It is quite profitable for a company to screw over customers. Just discourage them as much as possible to go to court by letting them sign a large page of legal gibberish, and don't screw them over too much, and the company will probably be fine.
I think the article is opaque on the terms of that waiver. W-F seems to be taking the stance that the signature applies to the entirety of the customer's relationship with the bank - sign this once for any account, and it applies to actions across all your accounts.
BoingBoing and others are taking the position that the waiver only applies to actions relating to the specific account that was signed for, each account standing separately.
The latter approach seems more sensible to me, but really it all comes down to the language of the statement that they (really) signed, and how courts have chosen to interpret that.
Despite the histrionics of this article, its actually an interesting question from a legal perspective. In the case of an account the customer never agreed to open - are they bound by the agreement which opened their primary account, or is there no legal agreement in place?
Assuming the original arbitration clause covered the entire business relationship - not just matters specific to the account opened at signing then it ultimately is a question of whether the fraudulent account is a new business "relationship".
I think the argument (speculating - the article isn't clear on this) is that the customers were bound to that agreement when they legitimately opened their first account.
I agree that the article sounds like histrionics because it doesn't explain the situation clearly. The article makes it sound like the customers are being bound somehow based on their forged signatures, which sounds like hogwash to me.
My suspicion is that the customers were bound to this term by opening their original account -- or at least, that's Wells Fargo's argument. The legal debate seems to be about whether the terms of service signed by the customer at that time would prevent them from suing over the additional fraudulent accounts. Basically, whether those terms of service apply to that situation or not.
I'm a bit of a numbskull when it comes to legal matters, but wouldn't any previous agreement between the bank and its customer become null and void when the bank willfully and egregiously commits criminal acts by forging signatures and signing them up for services they didn't agree to?
For me, this is one of the scariest issues USA faces, a de facto loss to right of trial via binding arbitation
First, no, contracts do not generally become void just because one party committed a crime.
Not that it really matters because, second:
>when the bank willfully and egregiously commits criminal acts
Wells Fargo has not been found guilty of committing criminals acts at all, much less willfully and egregiously. There are some ongoing criminal investigations, and they were hit by some civil penalties. But there have been no criminal convictions.
Consumer Financial Services Agreements: As of May 5th, the Consumer Financial Protection Bureau has proposed a rule that would prohibit mandatory arbitration clauses in financial services agreements that limit access to class action lawsuits. Once formalized, this rule would apply to all contracts, including those already signed. Although such a rule would not necessarily prohibit mandatory arbitration for single-plaintiff claims, arbitration clauses that do not specifically exclude class action lawsuits from their reach may be invalid regardless.[1]
Consumer Contracts: Although generally upheld, mandatory arbitration clauses in consumer contracts are non-binding when there is evidence of fraud. The Theranos lawsuits have recently brought this reality back to the attention of corporate lawyers. Because Theranos and Walgreens face accusations of widespread fraud, otherwise enforceable arbitration clauses are thrown out, allowing for class-action claims regardless. It’s important to note that these cases demonstrate that the fraud must merely be investigated, not conclusively proven, for the courts to now invalidate arbitration clauses.[1]
I think it's safe to say the alleged fraud in this case is under investigation.
> Judges in California and federal courts have ruled arbitration clauses signed by customers when they opened legitimate accounts prevent them from suing even over allegedly fraudulent accounts created without their knowledge.
Laws have been proposed to change this. Of course, given the election results, I highly doubt the bills, or the proposed CFPB rule you mention are going anywhere.
Fixed the link above! Can I pester you with one more question? Is there anything in the law about good faith in contracts? Say, I sign a contract with a private school for my son's education. (Note, this is a ridiculous scenario) that includes binding arbitration. If I find that a teacher has been sexually abusing him and the administration tried to cover it up, would I be restricted from a lawsuit and only allowed binding arbitration?
Talk to a lawyer in your local jurisdiction. :) But offhand:
> Is there anything in the law about good faith in contracts?
Not in the sense you mean, no. Generally speaking, if they sign it in bad faith (that is, with no intent to comply), and they do not comply, that would be fraud (ie, a crime). If they sign it in good faith (that is, with an intent to comply) but later do not comply, that's breach of contract (ie, a tort) but not fraud. In both cases the contract is broken, but only because they broke it. The intent to break it isn't really relevant to that.
Generally speaking the solution for your question is "make sure the contract contains a clause that automatically terminate the contract on initiation of a criminal investigation for child abuse by the authorities" if you're worried about that.
Edit: It's not directly relevant to your question, but I feel like I should link this article which is hilarious and disturbing, and goes into some details on the fraud/breach of contract distinction. https://www.bloomberg.com/view/articles/2016-05-23/countrywi...
If one can prove that a party premeditated and willfully went against the terms of the contract in order to deceive the other party and profited from this deceit while also breaking laws, what is the legal reasoning behind calling it a breach instead of fraud?
Fraud is a crime; a general definition might be "deliberate deception to secure unfair or unlawful gain", but in simple terms it's lying. If you lie to someone for financial gain, it's a crime. But violating the terms of a contract is not a crime, at least in the general case.
> But why?
Because that's what the law says. :)
> If one can prove that a party premeditated and willfully went against the terms of the contract in order to deceive the other party and profited from this deceit while also breaking laws
Very, very simply: If you lied, it's fraud. If you didn't lie, then it's not fraud. It might well be some other crime, but it's not fraud, because fraud is a word that means lying. So you say:
> went against the terms of the contract in order to deceive
But it depends what you mean by that. If I meant to follow the contract when I sign it, but later change my mind, and you just assume I'm following it, you are deceived, but I didn't lie, and it's not fraud. If I didn't mean to follow it when I signed it then I'm lying and it's fraud. Similarly if I mean to follow it when I sign, later change my mind, and you then ask me "hey, are you following the contract?", and I say "yes" even though I'm not, then I'm lying, and it's fraud. The key element isn't whether or not you were deceived, or whether or not I actually followed the contract, but whether I lied, because that's what the crime is.
Man, and I thought programming had difficult edge cases :)
From this post and the article you linked above, the takeaway I get is to ask everyday "Are you following the contract?" I understand the legal definition, but I gather that the layman will still think it's fraud.
I guess a simple solution in that scenario would be to have a checkbox asking are you following the contract every time they login to the server.
Re the link. It seems a step here would be to implement an automatic question in the transaction. "Are the new mortgages Acceptable." Seems less burdensome to clarify the law, but that may be a naive view on my behalf.
Aahh, ok. So say I sign a contract with a co-founder to develop an app. This co-founder is secretly part of my competition and he steals my source code for his company. That would be fraud?
Not necessarily. Typically your contract will be with the company you co-founded. Your co-founder is entering your company into a contract with you by signing as an authorized officer on behalf of the company. If that contract assigns the IP to your company, your cofounder is stealing your company's IP. If the contract says the source code is your IP (and perhaps licenses its use to the company for some permitted purpose), then your co-founder is stealing from you.
Now, if you can show the sole purpose of him forming the business with you was to steal your source code, then that's fraud.
> How can you be bound by things you never agreed to?
Wells Fargo didn't open accounts for random people; they opened accounts for their customers. Who agreed to resolve future disputes via binding arbitration. And one of those future disputes is over the fake accounts Wells Fargo opened later.
Whatever you think of arbitration agreements, it would make no sense to have one which terminated the moment you have a dispute.
This is more than just a dispute. This is criminal activity and fraud.
Consumer Financial Services Agreements: As of May 5th, the Consumer Financial Protection Bureau has proposed a rule that would prohibit mandatory arbitration clauses in financial services agreements that limit access to class action lawsuits. Once formalized, this rule would apply to all contracts, including those already signed. Although such a rule would not necessarily prohibit mandatory arbitration for single-plaintiff claims, arbitration clauses that do not specifically exclude class action lawsuits from their reach may be invalid regardless.[1]
Consumer Contracts: Although generally upheld, mandatory arbitration clauses in consumer contracts are non-binding when there is evidence of fraud. The Theranos lawsuits have recently brought this reality back to the attention of corporate lawyers. Because Theranos and Walgreens face accusations of widespread fraud, otherwise enforceable arbitration clauses are thrown out, allowing for class-action claims regardless. It’s important to note that these cases demonstrate that the fraud must merely be investigated, not conclusively proven, for the courts to now invalidate arbitration clauses.[1]
I think it's safe to say that fraud in this case has been conclusively proven.
It's not okay to do what they, Wells Fargo, have done(deceive) period.
Full accounting of moral behavior includes an absolute prohibition on selling with an intend to deceive via an asymmetry of information, since risk can be epistemic/subjective related to ignorance of outcomes that the counterparty already knows about, then they sold you a product/service/contract with an intend to offload risk on you, which is strictly immoral period.
Absolute prohibition on parasitism via exchanges made via an asymmetry of information and they cannot prevent restitution because you agreed to not sue for something else.
I am not making a value judgement on what they did - nor am I excusing it.
This is a legal argument about venue - where and how the case should be heard. Getting angry at Well's Fargo might feel good, but in the end its pointless. Understanding the law itself does have practical use going forward. Perhaps the scope of signing away your right to a class action will be better understood.
> Perhaps the scope of signing away your right to a class action will be better understood.
I don't think there is a lack of understanding, I think (although I have no evidence for this) that MOST consumers, if asked what that clause meant, would say something like "Oh, that's the weasel words that let the company get around legal rules." Which is essentially true.
The problem is lack of power, not lack of understanding. There is no way to avoid these arbitration clauses. The companys' interests are such that they will include them and make no exceptions; consumers cannot even refuse and find a competitor because ALL competitors in the market will insist on it. So long as we offer a "don't have to be subject to the law" clause, everyone will use it.
> Judges in California and federal courts have ruled arbitration clauses signed by customers when they opened legitimate accounts prevent them from suing even over allegedly fraudulent accounts created without their knowledge.
Interesting. So, signing a contract with no intent to comply, fraudulently signing a contract would disallow arbitration, but committing fraud after the fact is ok?
>Whatever you think of arbitration agreements, it would make no sense to have one which terminated the moment you have a dispute.
The very fact that fraudulently "opening" a new account counts as a "dispute" for "arbitration" shows what a load of shit mandatory arbitration agreements are.
It would seem to me that since WD offers free arbitration the prudent thing in this case would be for every single person affected to file for it on the same day and simultaneously withdraw their money leaving only $1 in the account. A bank run and 100,000 filed cases would make for a fine mess.
There is an obvious legal gap at work here and it isnt just wells fargo exploiting it.
Once a business has your info on file they can effectively open additional accounts or services for you at will. It can be difficult to seek any sort of remedy because it would be hard to prove damages except in extreme cases.
Let's take a gander at the federal arbitration act:
"A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy ...
shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."
Want to guess what grounds exist at law and equity for the revocation of a contract?
:)
Note also the now-common practice of requiring individual arbitration is not well-tested in court either. The FAA pretty clearly preempts court class actions when there are mandatory arbitration provisions. However, it is silent, and it's purpose unrelated, to whether that arbitration is individual or class arbitration. It seems likely to me that a state could reasonably say forcing individual arbitration was against their public policy, and not have that pre-empted by the FAA.
Outrageous! This is like a software company which pushes unwanted OS upgrades on its customers and then hides behind customers agreeing to a nag-screen exploding "offer" when the upgrade bricks some of the previously fine computers. Thankfully we in the software business don't have to worry about such things, because we are above such tactics.
All you little people, its really your fault for being such small fry...
It is despicable to me that citizens can be denied their right to access legal remedy by companies that won't deliver services to individuals without them agreeing to binding arbitration. Access to courts seems like it should be the cornerstone of society and should not be allowed to be removed so easily.
The appeal of arbitration for a pair of similarly sophisticated entities that have the ability to vet the clauses of the contract is obvious. But the potential for abuse with one large organization picking the arbiter and a lot of unsophisticated individuals trying their luck against them is pretty obvious too.
Abuse of arbitration is one of the several things that the Democrats (with one or two exceptions) have not made much of an issue over, and they wonder why they lose.
perhaps due to the clickbaity title, it seems people are reading "agree to arbitration" as "agree that Well Fargo's internal decisions are final and waive their right to legal remedy."
let's firstly identify that yes, this is how people in the thread take "agree to arbitration."
expecting to see that, for example, perhaps arbitration always results in the larger player being awarded whatever they say. (Meaning that it is equal to saying "agree that its decisions are final and customers waive all recourse.")
But it seems the link isn't quite conclusive - it seems the results just show that the "Forced arbitration clauses almost always favor the company over the individual" - which is very strong language, but is about "favor" and not outright as categorical.
So I'm curious if people have experience with arbitration -- is it fair to read the arbitration clause as being de facto tantamount to Wells Fargo's decisions being final? (With the arbitration itself being an afterthought, a mere formality.)
Or is it just a bit lopsided, but still not quite as final and definitive as that?
I ask because in theory, in an environment of frivolous lawsuits that can cost companies literally hundreds of thousands or millions of legal fees, it might certainly make sense for arbitration clauses to limit the extent to which they are embroiled in huge lawsuits.
This reason for arbitration would be a bit different from the reason that "it's really just an excuse to say whatever we say is final."
If I were a corporation, I wouldn't think that an arbitration clause is the same as saying "our company's policies are final and we decide what they mean: you waive all right to any recourse".
Is that what other people here think it means?
(Genuine, open question - as you can see I did a Google search more or less with this phrasing.) Curious what you think, or your experiences. Or whether you've used arbitration clauses in the past, either on the corporate side against a frivolous lawsuit, or as a consumer against a large corporation. (I don't expect corporate lawyers from large corporations to read this comment and respond honestly - but small startup CEO's and individuals, sure. Of course, if you're doing evil work for a large corporation as a corporate lawyer enforcing lopsided contracts, I guess you're welcome to come clean under a throwaway...)
This is worse than click bait; the headline is a falsehood designed to provoke outrage. WF is NOT arguing that customers are bound by forged signatures, despite what this headline implies. This is Fake News making the rounds. Good job HN.
you use really strong language (even in your username) and since it's just 27 days old, perhaps could make another one.
with that said, I think if you suggested an alternative title (under your handle or a different one) that better reflects the contents of the article, the mods would be inclined to change it. They often do - and clickbait titles are explicitly against HN policy :)
so go ahead and make a suggested title change, under your current or a different HN name. thanks.
Yet despite the user name, despite the strong language, cnnsucks is right: it's a crap, click-bait headline. Don't believe me? Then you go RTFA, and better yet go read the Reuters article from whence this sprang. Still convinced that the headline has anything to do with the truth? (And to be clear, the headline implies that customers agreed via forged signatures. No, customers "agreed" with their real signature when they willfully opened their original account.)
At the very least, link to the original Reuters article, and make a note to quit giving BoingBoing hits.
Changing the headline on HN doesn't redeem this; you'll still being linking the boingboing story with the same false headline. Just delete it and be more careful in the future.
As for my username, that's your call: ban it or don't. I'll call out fake stories with this account or some other either way.
I'm not a moderator! I just wanted to welcome you to our community - I agree with what you've written, and I hope you'll stick around and play by our rules: this is why this place is great, because people engage in civil discourse (for the most part). I agree with the gist of what you wrote above - but you could have said it without the demeaning tone and it would be taken seriously (including changing the headline as necessary - or even burying the whole story). I agree with you and hope you'll stay and contribute here, I recommend under a neutral name.
If we take as true that our legal system doesn't work and is host to numerous "frivolous lawsuits that can cost companies literally hundreds of thousands or millions of legal fees" then I can understand favoring arbitration as a way to protect companies.
However, I don't think that premise is true. I trust the open, standardized, and (mostly) consistent courts to fairly apply the law. While some lawsuits seem frivolous on the surface, I've consistently found that when I learn the details there is a good reason they proceeded.
well take a simple case. divorce proceedings are messy, with this in mind when you met your next great love, suppose that you wanted some kind of simple prenup with them, given that you and they are both great partner and very cooperative. if you did think it a good idea to sign a prenup, you wouldn't both agree to mediation/arbitration below any explicit terms about what you both intended going into it? It seems cheap and a whole lot better than the all or nothing of a full court proceeding being necessary in case of any disagreement - don't you think?
I mean that this is what I understood the purpose of arbitration to be. for both parties to say, "fine, let's go to a neutral third party and we'll agree to whatever they say" versus a full lawsuit.
Within your comment I don't see any positive aspect or defense of arbitration at all -- it seems like for you it is the same as "kangaroo court" and, for example, if you yourself had an arbitration clause in a prenuptual agreement it would be the same as a kangaroo court clause for you?
I guess then that I am not seeing the whole purpose of arbitration anywhere in your comment.
You seem like you might have this backwards. This isn't a clause creating the option of arbitration in the face of an otherwise guaranteed trip to court - you already have that option. This is a clause removing the option of going to court.
Yes, costs can be kept down by requiring things stay out of court. This is at the expense of some of the normal guarantees you can expect from our court system.
If that's okay for you, and you're in an equal bargaining position with the other party, go wild. You're not in an equal bargaining position with the banking industry when a majority of banks start adding the clause to their T&C.
The article only mentions it once, but this is "binding arbitration." "Binding" as in both parties are bound by the decision and neither has any further recourse.
>A decision on a binding arbitration cannot be appealed or overturned unless there are rare circumstances present (fraud, bias or other inappropriate actions on the part of the arbitration attorney). After the decision is rendered, the case is over.
The things that are the main worry here - bias - would be explicit grounds for throwing out binding arbitration. So I still don't follow how "binding arbitration" means "whatever the company wants, and you're SOL on your side."
It would be a clear case of bias if that were the case, and based on what I've just read would allow you recourse to a normal lawsuit...?
On the other hand, why are the decisions of unbiased arbitration worrysome? I don't understand what the problem people have with it is, and so far it hasn't been expressed clearly to me. Maybe you can help, jpallas?
Prenuptial agreements may not be the best example for your argument. Ask any divorce lawyer, and you'll learn that they're basically a legal fiction used to fool the rich that they can safely marry the poor.
I'm not arguing with you, just clarifying: my example was marrying an equal partner, without marked difference in richness and probably with some property on either side already -- surely you don't agree that even when parties are very amicable they cannot follow a simple plain-word prenup, or that nobody has used arbitration or mediation successfully to resolve minor disputes when they're otherwise trying to cooperate?
I'd be shocked at the latter but, if that is your knowledge then I'll take it. Are you basically saying that nobody has ever used arbitration the way it's written on the tin? (a low-cost way to have a third party mediate in case of minor disagreement?)
why does arbitration even exist in your opinion? (both in theory and practice).
someone's been downvoting me, but I'm just asking open-ended questions. I don't have a strong preconception myself. it's clear that in the rest of this article discussion thread, people are taking "arbitration" to mean "whatever the company wants." is this your experience too? (in such strong terms?)
You may be thinking of small claims courts, where some states don't allow lawyers. Arbitration follows whatever rules the arbitration organization chooses.
He got people to withdraw over 600 million from DSB Bank in a few days, which caused the bank to run out of liquidity and forced them to freeze accounts. This meant they lost all trust in the market and needed to ask other banks for emergency financing. All other banks declined (with good reasons, a bank falling apart combined with pending legal action on the mortgage side is a very high risk for them to take).
So within three weeks DSB was bankrupt. More here: https://en.wikipedia.org/wiki/DSB_Bank
I can imaging some disgruntled customers going after Wells Fargo in the same way. They have severe legal action pending (which makes them risky for others to save) and have destroyed their image by their reactions to this (which makes it easier to motivate customers to take action). All ingredients that killed DSB are there... The only difference is that DSB was one of the smaller banks and Wells Fargo is huge.