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June 25, 2012

Bank Fine Print: You Pay for Our Lawyer (Even if We Lose)

Filed under: Finance — Edgar (aka MrConsumer) @ 5:42 am

Pew Charitable Trusts released two studies over the past couple of years about checking account agreements that only a lawyer would understand.

Buried in these lengthy documents are some nasty clauses, including one like this:


Disputes Involving Your Account

You agree to be liable to us for any loss, costs, or expenses, including reasonable attorney’s fees, that we may incur as a result of any dispute involving your Account. You authorize us to deduct any such loss, costs or expenses from your Account without prior notice to you. This obligation includes disputes between you and us involving the Account and situations where we become involved in disputes between you and an authorized signer, another joint owner, or a third party claiming an interest in the Account. Also, it includes those situations where you, an authorized signer, another joint owner, or a third party take some action with respect to the Account which causes us to seek the advice of counsel, even though we do not actually become involved in the dispute. –PNC Bank disclosure

In plain English, this says that if they have to hire a lawyer because of a dispute relating to your account, whether you sue them or they sue you, or something else causes them to consult a lawyer, they can deduct the cost from your account without notice. They make no exclusion should you be right and win your case.

According to the Pew study, four of the 12 banks they examined had clauses similar to this, including HSBC Bank and TD Bank. They are asking the Consumer Financial Protection Bureau (CFPB) to look at issues like this, and require better disclosure or elimination of unreasonable contract terms.

For more information about this sneaky practice, you can read this LA Times story.

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  1. It’s clauses like this that cause the legislature to enact laws prohibiting such nasty things as unenforceable.

    Banks simply don’t seem to learn that such brazen terms will eventually backfire on them!

    Comment by Ken — June 25, 2012 @ 8:16 am
  2. I’m very surprised that these kind of terms haven’t had a lot of attention in the press. Is it because the banks haven’t really had a chance to enforce them?

    Comment by Wayner — June 25, 2012 @ 8:35 am
  3. Has this ever actually been enforced? Is there a single case where a customer has won the case and been responsible for the losing bank’s legal fees?

    Comment by Bryan — June 25, 2012 @ 9:29 am
  4. There are plenty of banks, so why would anyone use these? If I were a deposit holder at one of these banks, I would close my accounts immediately and write a letter to their corporate office explaining that the reason I did so was because of that specific contract language. If enough customers leave over it, they will stop.

    If you’re one of their customers, do this…

    Comment by Eric — June 25, 2012 @ 11:22 am
  5. Don’t be too sure that a court would strike this clause down as ridiculous and in favor of the consumer.

    Mouseprint.org, a few weeks ago, was kind enough to publish my personal story- how a storage facility entered my storage closet, and threw away a lifetime’s worth of my valuables. Even though the storage franchise admitted their error and all facts were against them (and I produced well over $20,000 in receipts for items lost), the court protected the storage company by limiting their liability to $5,000…as stated in their one-sided rental contract. After legal fees, my recovery for essentially being robbed was zero.

    It took 5 minutes for someone to write that into their contract. It took me three years to question it in a court. And it let the storage company get away with murder.

    Bottom line: In today’s culture, consumers have no rights and, barring buying an apple from the local grocer, your money is not safely spent ANYWHERE. The best you can do is speak up, report abuse, join any consumer advocacy group that you can, and VOTE.

    Comment by TonyP — June 25, 2012 @ 12:25 pm
  6. The legislature needs to take a look at this. I will definitely be asking my congressman to look into this and do whatever is necessary to bring this matter up for discussion and action. As deposit holders we can close our accounts with banks that have this clause in their contracts, but I think that congress needs to be involved.

    Comment by Quinder French — June 26, 2012 @ 2:34 pm
  7. Maybe I’m reading this wrong but doesn’t “loss” in “loss, costs or expenses” include judgements against the bank, i.e., if you win a $1,000 judgement against the bank, the bank deducts the $1,000 plus its own attorney’s fees from your account and hands you the $1,000 to fulfill the judgement?

    Comment by anonymous — June 27, 2012 @ 4:31 pm

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