In a bank dispute, even winners can be losers

WASHINGTON — Some consumers might be in for a surprise if they take their banks to court over checking or credit card disputes: A provision in account agreements says even if you win, you lose.

Checking account disclosures at four large banks and one large credit union make the customer liable for the bank’s losses, costs or expenses — including attorney fees — from any dispute over the account, regardless of who wins.

“If you win the lawsuit, you shouldn’t have to pay the other side’s costs and fees. It’s the other way around,” said William Shernoff, a Claremont, Calif., lawyer who specializes in representing consumers against insurance companies.

In more than 40 years of practice, he said he had never heard of a contract having such a provision.

“It’s offensive to consumers, to the legal system, to a sense of fairness,” said Pamela Banks, senior policy counsel at Consumers Union. “It’s outrageous.”

Researchers for the Safe Checking in the Electronic Age Project of the Pew Charitable Trusts discovered the provisions in checking account disclosures at HSBC Bank, TD Bank, PNC Bank, Branch Banking & Trust Co. and America First Credit Union as part of a review of fees and policies at large financial institutions.

Consumer law experts said the provisions are on shaky legal ground. But including them in disclosures might have a simple goal: scaring customers away from going to court at all.

“Does a consumer have a dispute with their bank and then they read this clause and say, ‘There’s no way I’m going to take this forward’?” said Susan Weinstock, the Pew project’s director.

Consumer advocates said it’s another example of how some banks try to take advantage of their customers and called for regulators to look at the practice.

Pew has called on the new Consumer Financial Protection Bureau to review so-called feeshifting provisions as part of a study the agency launched in April of arbitration clauses in contracts for bank accounts and other financial products. The agency said it would review the Pew findings as part of the study, which will look at dispute resolution processes.

The fee-shifting provision appears to be aimed at customers seeking to sue, Weinstock said. But the wording is very broad and could encompass any dispute.

HSBC’s 36-page Rules for Deposit Accounts phrases its clause this way:

“You agree to be liable to the bank for any losses, costs or expenses the bank incurs as a result of any dispute involving your account. You authorize the bank to deduct any such losses, costs or expenses from your account without prior notice to you.”

Neil Brazil, an HSBC spokesman, said the bank’s provision was designed primarily to protect it from any losses it might incur from legal disputes between the primary account holder and other authorized users, such as a spouse.

The other financial institutions cited by Pew include similar provisions, and specifically note that attorney fees are included in those costs.

Merrie Betbeze Tolbert, vice president of corporate communications for Branch Banking & Trust, said BB&T’s provision was designed to cover customers’ disputes with others when bank personnel or records are needed to help settle the disputes. The clause allows the bank to recover costs for providing records or testimony, for example.

Rebecca Acevedo, a spokeswoman for TD Bank, agreed that the language was “pretty typical” but would not comment further.

Pew said the policies were not typical.

The Safe Checking Project first found the provisions in a 2011 report titled Hidden Risks: The Case for Safe and Transparent Checking Accounts. For that report, Pew looked at the policies at the 10 largest banks by deposits and found the fee-shifting provision at three of them — PNC, TD Bank and HSBC. The finding drew little attention, and the consumer protection bureau was not open for business at the time.

Courts generally allow both sides in a legal dispute to decide who is responsible for the costs, said Stuart Rossman, director of litigation at the National Consumer Law Center. But a judge probably would not allow a bank to shift all the costs onto the customer, he said.