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I received an email from my bank a couple days ago that really has me floored, and I question how it can be legal. The email itself was a short blurb similar to the "We've updated our terms of service" emails, with a link to a document describing what was actually going on. The document itself is an "Arbitration and Waiver of class action." The effective date is defined as "the 61st day after we provide ... [this notice] to you." You have the option to opt out, in writing to a P.O. box. If you don't jump through these hoops "you will be deemed to have consented to [arbitration]." There is also a clause that it is retroactively enforceable if the claims "relate to conduct that happened [before this notice]."

It seems ludicrous to me that the process is

  1. Read bland email and click link to access actual information (action required)
  2. Read document that goes into effect at undefined date
  3. Write a letter with intent to opt-out (action required). No mention of what information to include, and I hope you have envelopes and stamps at the ready otherwise there's another hoop to jump through.

This feels to me like getting people to agree to contracts they've never seen. Can the bank do this? Are companies allowed to create contracts with anything they want in them, and apply them to you because you didn't read an email and subsequently jump through 5 hoops? Is this practice legally enforceable? How does this differ from me dropping off a letter in all my neighbors mailboxes stating that if they don't come to my place with an engraved card stating intent to opt-out, they're agreeing to send me $100 per month for eternity? What do you mean, they had the chance to opt-out!

The actual notice here.

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For a contract to be valid, there needs to be "consideration" given to both sides, which is legalese for "something of value", including money, credit, service or goods. In the case of your neighbors, you are not giving them any consideration

With your bank, you are engaged in a contract, with each of you receiving consideration. Generally, you get consideration in the form of a) safekeeping of your money, b) transfer service of your money (electronically and in the form of checks), and c) interest, however good or pitiful it may be. You bank generally gets consideration in the form of a) any fees you pay and b) the right to use your money in fractional reserve banking to make loans to other people.

Generally, with a bank contract, there is generally no temporal binding on your relationship; by which I mean, there is no penalty (with perhaps the loss of a promotional interest rate) if you were to withdraw all of your funds today without any notice and close your account. (Though some savings account have withdrawal delays that the bank may or may not choose to invoke, but that is more for avoiding "runs" more than anything else).

However, a bank can also choose to stop doing business with you, close your account, and give you your money, ending the relationship. Because you don't have a temporal binding in your contract, it can do so at any time. It can also refuse to do business with you under the existing terms, and only continue business on new terms.

For example, lets say that you have a lawn, and we have a contract (noting that a contract need not necessarily be written down) that I come by every Saturday and Tuesday morning and mow it, for which you pay me $20 a week. At any time, I could refuse to continue under the current terms, and demand new ones, which you could acquiesce to, refuse, or make a counter offer. So if I came to you and demanded $40 dollars a week, you could agree, refuse (and either end the contract or continue offering $20 a week for two days mowing), or counter offer, perhaps offering $30 or my only coming on Saturdays to mow the lawn for the original $20.

EDIT: Note that this process doesn't work with a loan, because with a loan, there is technically only a single transaction: the lender trades the one-time consideration of the loan (money) for the borrower's binding promise to repay the money, by a specified schedule with a specified rate of interest.

You actually have three options here: accept the new terms, send a letter to opt out, or stop using the service and terminate the contract that you have in place with your bank (which should be relatively simple and painless, EDIT: Unless you have a loan, but if you did, said loan would almost certainly not be affected by the change in terms, as one side cannot unilaterally change a loan contract). The reason for the opt out clauses is that binding arbitration clauses are under fire, with many (myself included) believing that they infringe on important rights. The opt-out clause, which gives you the option not be bound by the clause if you take action, is intended to be more palatable to judges, who might otherwise be more inclined to strike the contract in its entirety or otherwise create precedent hostile to arbitration.

As for the required format of the opt-out notice: yes, they are intentionally making it difficult for you to file it; however, they have chosen a format that is judicially recognized and until very recently, was the default means of judicially recognized communication. It was only in the last few years that courts have allowed for text messages, emails, etc. to be used for official court communications, such as summons, subpoenas and other serviced documents. Before that, the only option was mail, preferably certified, or in some cases, newspaper announcements, if mail service could not be used.

  • Thanks for your answer. Some info in here I didn't know I wanted to know. I intended to keep the ethical aspect out of my question, but my frustration came through more than I intended. As for my options, due to the retroactive portion of the new terms I absolutely have to opt-out. The only variable is if I still want to do business with a company that engages in this sort of practice. I loathe to think how many similar things I've already missed. "We had a giant data breach 90 days ago, luckily for us 95% of our customers have agreed to settle out of court!" -Ludicrous! – Will Oct 5 '18 at 0:23
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    "terminating the contract that you have in place with your bank (which should be relatively simple and painless)." If you are a deposit customer is should be simple and painless. If you borrow money from the bank and your creditworthiness has declined since the loan was made, refinancing is not an option and this may be more difficult. But, usually, when this is the case, new terms won't apply retroactively unless you borrow additional principal from the bank. – ohwilleke Oct 5 '18 at 4:03
  • "create president" - Do you mean precedent? – Brandin Oct 5 '18 at 5:06
  • @ohwilleke: you make a good point, that hopefully my edit has addressed. I overlooked loans, as I don't consider the part of "banking services". – sharur Oct 15 '18 at 22:22
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Can the bank do this?

Yes.

Are companies allowed to create contracts with anything they want in them, and apply them to you because you didn't read an email and subsequently jump through 5 hoops?

It is allowed to do this because it is part of the original agreement you entered into when you established a relationship with the bank and signed a lot of fine print (or consented to that fine print by using their services).

Is this practice legally enforceable?

Yes, within reason. Certainly in these circumstances.

Certain changes (e.g. you hereby provide that your first born son shall be sacrificed if you breach the terms of this agreement) are prohibited under one of several legal theories (good faith and fair dealing, public policy, a doctrine of reasonable expectations in contracts of adhesion, etc.)

How does this differ from me dropping off a letter in all my neighbors mailboxes stating that if they don't come to my place with an engraved card stating intent to opt-out, they're agreeing to send me $100 per month for eternity?

They didn't have the original agreement with you that authorized that practice, and also aren't providing commercial services to you which you are accepting from them on an ongoing basis.

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