Corporate punishment
Bank of America pushes fall ballot measure that would erode consumer rights

By Becky Wildman-Tobriner

When Paul Miller signed up for direct deposit with Bank of America, he was afraid something like this would happen. Miller has been mentally disabled since a beating in Thailand, where he was a photojournalist covering the Khmer Rouge, compounded his injuries from an earlier car accident.

Now living in San Francisco, Miller receives monthly supplemental security income and social security disability insurance payments. In 1998, Bank of America deposited $1,799.83 in his account by a random error, and Miller used the funds to pay bills. He didn't question his increased balance because he had heard the government was increasing social security checks. Three months later Bank of America realized the mishap and took the money back.

"All of a sudden when I wrote a check for rent, there was no money in there," Miller told the Bay Guardian.

Miller knew a bank error shouldn't result in his bankruptcy and impending eviction. When he began receiving benefits, he said the bank assured him that only he could make deductions from his account. Since state law forbids banks from removing money from any type of social security-linked account, Miller sued. As Carmen Balber of Election Watchdog told us, this case concerns the bank taking money from funds it wasn't allowed to access. "It has nothing to do with what kind of fees are or are not OK."

Miller wasn't the only social security client affected by Bank of America's illegal actions. Over the past 10 years the bank has taken in $284 million from fees on social security accounts for overdraft protection or insufficient funds, according to an estimate it provided to Miller's lawyers. Jerry Flanagan of Election Watchdog said the bank has made a routine practice of nickel-and-diming poor and elderly consumers, taking small amounts that add up for the bank. Miller's suit is a class action under California's Unfair Business Competition Law. The law, enacted in 1930, protects consumers by allowing any member of the general public to file suit when business enterprises act illegally or unethically.

Miller and the other class members won a landmark verdict last month. A jury awarded $1.1 billion to reimburse class members, but they won't see that money for an estimated two years, until the completion of the likely appeals process. A May 12 hearing will determine whether the bank must stop the practice of removing funds for the duration of the proceedings.

Bank of America spokesperson Harvey Radin told us that the bank treats these accounts the same way every other bank in the country does. "We think the suit has no merit," he said. He believes that the bank hasn't taken any illegal action but wouldn't get into specifics because the case is still pending.

As a response to consumer lawsuits, Bank of America, joining with some of the state's largest corporations, has donated $100,000 toward funding an initiative for the November ballot that would amend the Unfair Business Competition Law so that only the government can sue companies, denying individuals and public interest groups the right to protect themselves.

That change could prevent suits that have served the broad public interest. For example, in the 1990 Warren v. Safeway Stores, Inc. case, consumers challenged Safeway's practice of altering the package date on meat to prevent expired meat from being sold as fresh. If this upcoming initiative wins, cases like that won't get filed.

"We believe there are flaws in the [Unfair Business Competition] law as it stands today," Bank of America spokesperson Shirley Norton stated, refusing to go into detail. "That's why we support changes."

In addition to Bank of America, some major donors – including Intel, Blue Cross of California, and State Farm Mutual Automobile Insurance Company – have already raised $6.5 million. Sixty nonprofits are fighting the initiative, which they recognize poses a serious threat to consumer rights.

Consumer advocates wrote to California Chamber of Commerce president Allan Zaremberg April 13, pointing out that "you don't seem to believe any corporate conduct rises to the level of an unfair business practice." The letter accuses the Chamber of Commerce of firing the first shot in a ballot war that in the end the public will win. Chamber spokesperson Sara Lee told us Zaremberg had no comment on the letter.

"Goliath is spending millions of our dollars to remove all accountability from banks and car dealers," Flanagan said. "But David can prevail."