Skip to main content

Sign up for our newsletter.

Quality journalism. Progressive values. Direct to your inbox.

"Wells Fargo was just beginning to recover from the reputational losses it suffered from what, in Trumpian terms would be described as “fake” bank accounts, when it was disclosed that its employees had discovered a new way of bilking customers-insurance sales connected with car loans," Brauchli writes.

"Wells Fargo was just beginning to recover from the reputational losses it suffered from what, in Trumpian terms would be described as “fake” bank accounts, when it was disclosed that its employees had discovered a new way of bilking customers-insurance sales connected with car loans," Brauchli writes. (Photo: Alex Proimos/Flickr/cc)

More Banking Follies

Christopher Brauchli

A power has risen up in the government greater than the people themselves, consisting of many and various and powerful interests . . . and held together by the cohesive power of the vast surplus in the banks.
—John Calhoun, May 27, 1836 Speech

It was a sad coincidence. It occurred within a couple days after the public was apprised of Wells Fargo’s new foray into discovering ways to make more money by bilking its customers.

It was not, of course, a first for that venerable institution. Last year it was learned that millions of customers of the bank had bank accounts and credit cards opened for them by employees of the bank, without being authorized to do so by the customer. If the employee had not only opened the account, but had caused the bank to deposit, for example, $1000 into the account in order to give it life, the practice would not have upset the unsuspecting customers. Instead, the employees simply opened the accounts and, instead of depositing money into them, charged the account holders fees for creating the accounts and associated fees for services that accompanied the new accounts.

That, of course, did not please the customers and, when the practice was discovered, caused the bank to pay a $185 million dollar fine and $142 million to the millions of its customers who were victims of the bank’s practices. Wells Fargo was just beginning to recover from the reputational losses it suffered from what, in Trumpian terms would be described as “fake” bank accounts, when it was disclosed that its employees had discovered a new way of bilking customers-insurance sales connected with car loans.

In late July 2017, we learned that approximately 500,000 bank clients were sold car insurance when taking out car loans with the bank, even though they already had car insurance. According to reports, the bank will pay $80 million to clients who were bilked. Whether fines will be imposed on the banks will not be known until some time in the future. (In fairness to Wells Fargo it should be noted that in 2013 JPMorgan Chase paid $13 billion in fines and penalties for some of its activities. It makes Wells Fargo’s recent activities seem trivial.) The other event of note that happened at the end of July was purely coincidental.

The coincidence occurred when we learned that Congress was on the verge of getting rid of a new rule that had been proposed by the Consumer Financial Protection Bureau. The rule, if permitted to go into effect on January 1, 2018 as planned, would let consumers band together when they were defrauded by banks, and sue the banks as a group in what is known as a “class action.” Under current practices, individuals defrauded by bank practices, such as those undertaken by Wells Fargo, cannot bring class action lawsuits, but are forced into arbitration by virtue of the agreements they signed when entering into transactions with the bank. The rule proposed by the Consumer Financial Protection Bureau and was to take effect on January 1, 2018, would ban compulsory arbitration. Once it became effective it was estimated it would cost banks approximately $1 billion a year. That seems to many observers like a lot of money, but banks are believed to have roughly $171 billion in profits annually, so the rule is not as onerous as it might at first seem.

Keith Noreika, the acting Comptroller of the Currency, has said he has no plans to try to block the rule even though he thinks it is a bad rule. Indeed, in addressing the effects of the rule were it to go into effect he said: “Ultimately, the rule may have unintended consequences for banking customers in the form of decreased availability of products and services, increased related costs, fewer options to remedy consumer concerns and delayed resolution of consumer issues.”

What he is, of course suggesting, is that if the rule were to go into effect, banks, confronted with the possibility of law suits and the need to defend their practices in front of juries instead of boards of arbitration, might decide to no longer issue credit cards or otherwise deal with consumers. Because of the actions of the House of Representatives and, once it returns to Washington, the Senate, Mr. Noreika will never have to explain what he meant when he said that: “The rule [if put into effect] may turn out to be the proverbial straw on the camel’s back.”

Mr. Noreika will never have to explain why, a $1-billion-dollar reduction in profits for the camels (qua banks) would be the straw that would put them out of business. That is because, availing itself of procedural steps it can take under the Congressional Review Act to avoid the implementation of recently enacted regulations it dislikes, the House of Representatives passed a “resolution of disapproval” to revoke the rule before leaving on its well-deserved five-week vacation.

The Senate is expected to follow suit when it returns from its holiday. The camel, whose back was threatened by a straw, can be heard breathing a big sigh of relief. The consumer can be heard simply sighing.


Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.
Christopher Brauchli

Christopher Brauchli

Christopher Brauchli is a columnist and lawyer known nationally for his work. He is a graduate of Harvard University and the University of Colorado School of Law where he served on the Board of Editors of the Rocky Mountain Law Review. For political commentary see his web page at humanraceandothersports.com.

This is the world we live in. This is the world we cover.

Because of people like you, another world is possible. There are many battles to be won, but we will battle them together—all of us. Common Dreams is not your normal news site. We don't survive on clicks. We don't want advertising dollars. We want the world to be a better place. But we can't do it alone. It doesn't work that way. We need you. If you can help today—because every gift of every size matters—please do. Without Your Support We Simply Don't Exist.

'Stop Line 5': Valve Turner Forces Shutdown of Enbridge Oil Pipeline in Michigan

"We are here to protect the water, land, and air that support all life, including our own. Line 5 poses an immediate threat to our lives and these actions are taken out of necessity and in self-defense."

Jessica Corbett ·


'Delay Is the New Denial': Study Confirms 99.9% of Scientists Agree on Climate

"It's pretty much case closed for any meaningful public conversation about the reality of human-caused climate change."

Brett Wilkins ·


Exposed: How Pfizer Exploits Secretive Vaccine Contracts to Strong-Arm Governments

"Pfizer has used its monopoly on a lifesaving vaccine to extract concessions from desperate governments," said the report's author, urging action from the Biden administration.

Jessica Corbett ·


'A Toxic Presence in the Party': Ocasio-Cortez Joins Calls for Jay Jacobs to Resign

"India Walton is the Democratic nominee for mayor of Buffalo. No amount of racist misogyny from the old boys' club is going to change that."

Brett Wilkins ·


New Multimedia Report Details Unprecedented 'Permian Climate Bomb' in Texas

"If the Biden Administration wants to be serious about its promise to demonstrate U.S. climate leadership, it must first clean up its own backyard."

Kenny Stancil ·

Support our work.

We are independent, non-profit, advertising-free and 100% reader supported.

Subscribe to our newsletter.

Quality journalism. Progressive values.
Direct to your inbox.

Subscribe to our Newsletter.


Common Dreams, Inc. Founded 1997. Registered 501(c3) Non-Profit | Privacy Policy
Common Dreams Logo