Banking Law

I received some push back from a few readers on a couple of recent posts, and inasmuch as I long ago decided I didn't have time to both practice law and "police up" the blog's comments box from the leavings of tin foil hat wearers, university professors with a crackpot axe to grind, consultants trying to sell my readers their semi-worthless-to-totally-worthless services, Eastern European and Nigerian cybercrooks, spambots, people with way too much time on their hands trying to drag me into fights with other bloggers, and vitriolic wingnuts both pro and con the positions of yours falsely, I'll pass these comments along to readers via this post. My "opponents" are readers who respectfully disagree and since they voice reasonable opinions without using broad-brush labels with which to tar me or any four-letter Anglo-Saxon expletives or scatological references to describe the content of my posts, I've decided on a whim to give their views an airing.

In response to my recent post on the Wells Fargo class action litigation over the high-to-low posting of debit card and check expenditures, a former in-house counsel for one of the nation's largest financial institutions wrote that he thought that Judge Alsup's decision was founded solely upon the use of the word "may" rather than "will" in the portion of Wells Fargo's account agreement that discusses the use of "high-to-low" posting by the bank. Based on that interpretation, my correspondent thinks that Judge's Alsup's decision is certain to be overturned on appeal by the Ninth Circuit.

I think my correspondent is incorrect. While Judge Alsup does find that the use of the term "may" is misleading, he also gives much weight to the manner in which the disclosure of the posting process and its potential impact on consumers was "hidden" within an alleged mass of documentation saturated with mind-numbing legalese. He also determined (correctly or incorrectly) that Wells Fargo's advertising was misled  customers about this practice. As I said in my post, I'm not making a call on how this will turn out on appeal. The point I was trying to make in that post was that I, personally, find the use of such tactics to maximize fees at the expense of people trying to squeak by financially on a day-to-day basis to be distasteful, and a public relations black eye for bankers generally.

As to another recent post concerning Jeff Gerrish's contention that off-site monitoring by federal banking regulators results in examiners entering the bank with a predetermined rating that they then proceed to find evidence to support,  federal banking regulators, who did not wish to be identified or directly quoted (I assume they would be reprimanded for reading the heretical snark that is emoted by this blog), took issue with that contention. To paraphrase (but not quote) my correspondents, Jeff's theory is nice, but isn't more than an unproven theory. Offsite monitoring is often more generous than what "the boots on the ground" find when they venture into the bank and start getting into the weeds. While the majority of time the offsite and onsite determinations do mesh, there are many cases where examiners ultimately uncover less-than-strict supervision that has allowed banks to deviate substantially from their business plans in ways that are not reflected in the reported results upon which offsite ratings are based. Once examiners start plowing through loan files and overturning logs and rocks onsite, all kinds of grubs and worms start running about. Sometimes, the situation as revealed by the onsite examination is much worse than the offsite ratings would have indicated.

None of my correspondents cited a case where the offsite ratings were later determined to be heinously and unfairly negative, and that when examiners showed up, they determined that the bank was in much better shape than they would have expected coming in the door the first day of the examination. I'm sure that was merely an oversight.

"Eye of the beholder" stuff, for sure, eh?