Big banks have proven yet again that they cannot be trusted to do what is best for the consumer. And this time, the U.S. Senate agrees that they don’t have to!
Last week, the Senate voted to repeal a rule that banned most mandatory arbitration clauses in credit card agreements, checking account agreements, car loans, and many other types of consumer banking transactions. Mandatory arbitration clauses are buried in the fine print, often unnoticed by consumers. They force consumers to resolve complaints with private, individual arbitration proceedings. Without the clauses, consumers can band together and bring a class action lawsuit.
Banking industry lobbyists fought hard for this change and gained significant support.
This Isn’t Consumer Friendly!
Those supporting the repeal say it is good for consumers because the average payout on a class action lawsuit is only $32, while the average arbitration award is much higher. The numbers may be accurate, but the logic is flawed. Anyone who’s ever been hit with an unfair bank charge knows it’s not worth going to arbitration to get back $25 or $40. After contacting the bank (or not), most people just drop it. For the most part, arbitrations only happen if there’s a higher amount of money at stake to begin with.
When consumers are forced to sign arbitration clauses they have little recourse. A bank can keep charging improper fees, or setting up fake accounts, or whatever else it can think of, because it knows that a consumer won’t follow through when only a small amount of money is involved. By inflicting small wounds, that collectively add up to millions of dollars, banks can increase their profits at the customer’s expense.
Class action lawsuits are a slow and cumbersome way to get recompense for individual victims, but they do serve a broader purpose. They expose patterns of wrongdoing and hold big corporations accountable. Individuals don’t have the time, money or expertise to go up against a major bank or corporation, but class action law firms do. The lawsuits are public records, which means the accusations and evidence can’t be hidden from view.
We already Don’t Trust Banks and They’re Making It Worse
Ever since the housing crisis, banks have had a crisis in consumer trust. When Wells Fargo revealed that employees desperate to meet sales goals opened as many as 3.5 million fake accounts, things only got worse. At the same time, distrust for large institutions in general is high, with many people saying the thing they value most is authenticity.
So how do banks develop trust and authenticity? For starters, they don’t badger Congress to repeal a law that seems good for consumers. It makes them look like they’ve got something to hide. This sets the trust-meter backward, not forward.
Lying to customers, as Wells Fargo did, creates negative emotions. So when the banking industry tells Congress that consumers will be better off if they can’t fight unfair banking practices in open court, it just feels like another lie. And this creates even more negative emotions.
In our global customer experience consultancy, we recognize that a customer’s experience has several components. Rational factors like the number of convenient ATMs and the fees charged are one part of a banking relationship, but the vast majority of any customer experience is made up of emotional and subconscious factors – like trust. We combine these factors into a unique Emotional Signature that shows the level of an organization’s emotional engagement with customers. In general, positive emotions drive value and loyalty, while negative ones destroy it.
For banks, the emotional signature seems bottom-heavy with negative emotions that destroy value. Wells Fargo took a step in the right direction when it apologized and changed its employee compensation structure. Perhaps a clear and simple grievance procedure or a ‘customer is always right’ approach to resolving simple fee disputes would be another step toward restoring trust. However, when banks resist efforts to make their practices more transparent and consumer friendly, they are sending a clear signal that they don’t plan to change at all!
What about you? Do you trust your bank? Let’s talk about it in the comments section below.
Find out more about how the banks should be creating an excellent CX and feelings of trust and valued – download my eBook, “Unlocking the Hidden Customer Experience: Short Stories of Remarkable Practices that Ensure Success” which explores both the philosophy behind great Customer Experience and the best (and worst) real-world examples of them.
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Colin Shaw is the founder and CEO of Beyond Philosophy, one of the world’s leading Customer experience consultancy & training organizations. Colin is an international author of six bestselling books and an engaging keynote speaker.
Follow Colin Shaw on Twitter @ColinShaw_CX