FAIRBANKS — Many of us here in Alaska know a service member or veteran. They face unique challenges and threats in the financial marketplace. Active-duty members of the military are often young, relocate frequently, and are often deployed overseas, making them vulnerable to financial mistreatment. Service members are also concentrated on military bases, which makes them easy and profitable targets for predatory financial companies.
Veterans may be targeted by predatory financial actors for their guaranteed income, because of loopholes in federal law, or based on physical or mental disabilities suffered while in service.
That’s why Congress, when it established the Consumer Financial Protection Bureau in the wake of the 2008 financial collapse, included in it a special Office of Servicemember Affairs. While the CFPB protects all of us from financial rip-offs, it has a special duty to protect those who serve.
One problem service members and veterans face is forced arbitration clauses buried in the fine print of bank accounts, auto loans and other contracts that strip them of their day in court when big banks and others violate the law. Instead, disputes are sent into a rigged, secretive process where the banks often choose the arbitrator.
Recently, the Consumer Bureau stayed true to its mission to protect those who serve by issuing a rule restoring the constitutional right to go to court by limiting the use of forced arbitration “rip-off clauses.” But bank lobbyists are pushing Congress to take away that restored right to fight wrongdoing.
The House of Representatives, under Wall Street pressure, has already voted to repeal the new rule. It is up to the Senate to protect service members, veterans and the rest of us from wrongdoers like Wells Fargo.
Wells Fargo, which has nearly 50 branches in Alaska, has repeatedly engaged in illegal conduct and aggressively uses forced arbitration against consumer claims.
Wells Fargo opened up to 3.5 million fake accounts, including an estimated 5,970 in Alaska, from 2002 to 2015 without customers’ consent.
While a judge found its overdraft practices “unfair and fraudulent” and ordered $203 million in refunds in California, Wells Fargo has repeatedly fought against relief for consumers in Alaska and all other states to avoid repaying up to $1 billion.
Wells Fargo was fined millions for illegally foreclosing on service members or repossessing their cars in violation of the Servicemembers Civil Relief Act. In July, Wells Fargo also admitted that more than 800,000 people who took out car loans from Wells Fargo, including service members, were charged for auto insurance they did not agree to or need. Some of the contracts had forced arbitration clauses.
The Pentagon, which opposes forced arbitration and class-action bans for service members, has found that financial abuses are a leading cause for service members to lose security clearances, resulting in lower unit preparedness.
While the Pentagon has banned forced arbitration under its Military Lending Act rules, lenders can and do force arbitration of claims under the Servicemembers Civil Relief Act, which reduces interest rates on pre-service loans and protects service members against default judgments, foreclosures, and repossessions while they are on active duty.
Veterans, of course, like other consumers, have no protection against forced arbitration, nor do active-duty military if they are harmed by other consumer financial abuses.
The CFPB arbitration rule doesn’t even ban arbitration. It simply ensures that service members can band together to go to court to defend their rights and enforce protections against lenders that target our military. The rule has received strong support from The Military Coalition, which represents 5.5 million service members.
The Consumer Bureau provides an invaluable service to America’s men and women in uniform and all consumers. Since 2011, the CFPB has provided more than 29 million consumers a total of nearly $12 billion in relief through its enforcement actions. To protect the men and women of America’s armed forces and all Alaskans, our U.S. senators should support the views of the Military Coalition, not Wall Street. They should vote to defend the CFPB and its forced arbitration rule; they should oppose allowing Wells Fargo and other wrongdoers to hide from responsibility.
Steve Cleary is board chairman of the Alaska Public Interest Research Group, a nonpartisan public interest advocacy organization founded in 1974.