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Wells Fargo is asking courts to dismiss lawsuits brought by customers for damages caused by fake accounts created by bank employees because of arbitration clauses signed by those customers when they opened bank accounts.
A typical arbitration clause contained in the fine print of bank account agreements looks like this:
ARBITRATION AGREEMENT
Binding Arbitration. You and Wells Fargo Financial National Bank (the “Bank”), including the Bank’s assignees, agents, employees, officers, directors, shareholders, parent companies, subsidiaries, affiliates, predecessors and successors, agree that if a Dispute (as defined below) arises between you and the Bank, upon demand by either you or the Bank, the Dispute shall be resolved by the following arbitration process. However, the Bank shall not initiate an arbitration to collect a consumer debt, but reserves the right to arbitrate all other disputes with its consumer customers. A “Dispute” is any unresolved disagreement between you and the Bank. It includes any disagreement relating in any way to your Credit Card Account (“Account”) or related services. It includes claims based on broken promises or contracts, torts, or other wrongful actions. It also includes statutory, common law and equitable claims. A Dispute also includes any disagreements about the meaning or application of this Arbitration Agreement. This Arbitration Agreement shall survive the payment or closure of your Account. You understand and agree that you and the Bank are waiving the right to a jury trial or trial before a judge in a public court. As the sole exception to this Arbitration Agreement, you and the Bank retain the right to pursue in small claims court any Dispute that is within that court’s jurisdiction. If either you or the Bank fails to submit to binding arbitration following lawful demand, the party so failing bears all costs and expenses incurred by the other in compelling arbitration.
And the sad news is that some judges are actually going along with the bank and dismissing cases.

Okay, we get it.  Arbitration clauses serve a legitimate purpose of reducing the cost of litigation between banks and its customers.  We can envision that such a provision may help reduce the cost of solving routine issues such as how interest is computed or when late fees apply or other issues regarding the terms of the contract.
But to apply the arbitration clause to fraudulent or even criminal wrongdoing committed by the bank seems to go way beyond what a reasonably prudent customer would anticipate.  Sure, I may expect the arbitration to cover nerdy issues of interest and fees, but do you mean to tell me that customer that is physically assaulted by a bank employee has agreed to binding arbitration when they open up a lousy $10 savings account?  If a rogue group of Wells Fargo collection agents take my daughter hostage until the account is paid, have a agreed to arbitrate this wrongdoing?
My expectation of an arbitration clause is that its application is limited to accounts that I voluntarily open with the bank.  The notion that I have somehow given Wells Fargo the right to arbitrate the murder my family or to open fake accounts without my knowledge is absurd.  The terms of the arbitration agreement are far too vague to permit that interpretation, and even if the terms were clear such an agreement clearly violates public policy and should not be enforced.
Despite some success the bank has achieved in cases so far, I suspect that courts will be reluctant to allow such a vast application of the arbitration agreements going forward.
Wells Fargo still doesn’t get it.  I’m hoping the courts do.
 

The biggest money pit I see when I interview prospects with financial problems is the car — always.  I have even seen people paying half of their disposable income in car payments (plus insurance, tolls, repairs, maintenance, tickets and all the other costs we don’t often consider).  It’s insane.  Here’s a post from Jay Miles in Quora.com, in answer to a young man thinking about buying a Tesla, that says it perfectly:
“No, don’t buy a car.  Cars don’t make money.  They’re depreciating assets.  You already have a wife, so there’s no need to show off.
Mathematically, it doesn’t make sense to ever spend more than $20,000 on a vehicle.  Despite being a cool Tesla, it won’t hold its residual value any more than another flashy brand.
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© Daniel Steger for openphoto.net
The biggest money pit I see when I interview prospects with financial problems is the car — always.  I have even seen people paying half of their disposable income in car payments (plus insurance, tolls, repairs, maintenance, tickets and all the other costs we don’t often consider).  It’s insane.  Here’s a post from Jay Miles in Quora.com, in answer to a young man thinking about buying a Tesla, that says it perfectly:
“No, don’t buy a car.  Cars don’t make money.  They’re depreciating assets.  You already have a wife, so there’s no need to show off.
Continue reading

Here at Shenwick & Associates, many of our clients have concerns about tax debts. However, our bankruptcy practice is over 20 years old, and in our experience, tax debts are more easily resolved than student loan debts.

In order to discharge taxes in bankruptcy, the taxpayer must show that:

1. There is no fraudulent or willful evasion of the tax debt.

2. The tax debt is at least three years old.

3. A return for the tax debt was filed at least two years ago.

4. The income tax debt was assessed by the IRS at least 240 days ago.

Other options outside of bankruptcy also exist for resolving tax debts:

1. Currently Not Collectible (CNC) Status. If the IRS agrees that you can't both pay your taxes and your reasonable living expenses, it may place your account in CNC (hardship) status. While your account is in CNC status, the IRS will not generally engage in collection activity (for example, it won't levy on your assets and income). However, the IRS will still charge interest and penalties to your account, and may keep your refunds and apply them to your debt.

   Before the IRS will place your account in CNC status, it may ask you to file any delinquent tax returns.

   If you request CNC status, the IRS may ask you to provide financial information, including your income and expenses, and whether you can sell any assets or get a loan.

   If your account is placed in CNC status, during the time it can collect the debt the IRS may review your income annually to see if your situation has improved. Generally, the IRS can attempt to collect your taxes up to 10 years from the date they were assessed, though the 10-year period is suspended in certain cases. The time the suspension is in effect will extend the time the IRS has to collect the tax.

2. Offer In Compromise (OIC). An OIC allows you to settle your tax debt for less than the full amount you owe. It may be an option if you can't pay your tax liability, or doing so creates a financial hardship. The IRS considers your unique set of facts and circumstances:

   Ability to pay;
   Income;
   Expenses; and
   Asset equity.

   The IRS generally approves an OIC when the amount offered represents the most it can expect to collect within a reasonable period of time. However, to be eligible for an OIC, taxpayers must be current with all filing and payment requirements.

3. Installment Agreement. If you're financially unable to pay your tax debt immediately, you can make monthly payments through an installment agreement. Before applying for any payment agreement, you must file all required tax returns.

Tax cases and their resolution are challenging, even for experienced practitioners. For advice on how to deal with your tax debts, please contact Jim Shenwick.