Not Cool, Bank of America

I used my phone to remotely deposit a check today at Bank of America. Before I was able to proceed with the transaction, however, Bank of America required me to agree to new terms and conditions for mobile deposits. The terms and conditions were presented to me on my smartphone (roughly a 4''x 2'' screen). I could have pressed "accept" before I scrolled through any of the terms, but I actually went and scrolled through. It took several scrolls before I got to the end—these were not a short list of terms and conditions, and there was no indication of what had changed. I have no idea there was only a minor amendment or something substantial. More disturbingly, I was given no option of printing or emailing myself the new terms and conditions to which I agreed; I have no idea where (if anywhere) I can access those terms that I have supposedly "agreed" to.

Now on some level this is all silly. There isn't a consumer around who actually reads these terms and conditions. I'm unusual in even being interested in looking at them (not least because I use a BoA deposit account agreement as teaching materials), but the legal fiction here is that because I was shown the terms and pressed "I accept" that I have bound myself contractually. Obviously this is a mockery of the fundamentals of contract law, but if we're going to maintain the legal fiction, it's necessary to keep up certain pretenses. Otherwise, let's stop pretending that we are in the world of contract, in which case, we should drop disclosure requirements altogether and mandate standard terms that do not vary among market participants other than allowing some very limited options (chocolate, vanilla, or strawberry, but no Rocky Road). I don't think regulation is prepared to go in that direction yet, which means that we do need to take the contract fictions seriously.

This sort of problematic disclosure is a poster child for where regulatory intervention is needed. My harms, if any, are minimal, and I'm subject to an arbitration agreement that surely includes a class action waiver, so I'm not about to litigate. Fortunately, we have a Consumer Financial Protection Bureau that can address faux disclosures with its UDAAP power. Let's see how that would apply.

First, is BoA's disclosure "unfair"? Unfairness requires (1) a substantial injury to consumers, that is (2) not reasonably avoidable by consumers, and (3) is not outweighed by countervailing benefits to consumers or competition.

It's not clear to me that I have suffered any injury here—how could I even tell, as I don't know what terms have changed?—much less a substantial one, but if I did, it doesn't seem reasonably avoidable, as I cannot tell what I am agreeing to, and I don't see any countervailing benefits from this process. I guess there's an argument that I any injury would be reasonably avoidable by just declining the new terms and conditions, but then the functionality of my deposit account relationship would be significantly reduced, and we'd have to address the lock-ins that exist with deposit accounts (transaction costs of switching are raised from automatic bill payment and direct deposit; cross-selling of bundled deals raises the cost of withdrawing from a deposit relationship). At this point, I don't think there's anything "unfair," even though I don't like the practice.

The analysis for "abusive" looks a bit different. There are four alternative prongs of "abusive", and I think three could apply here. First, I think the way Bank of America has presented the new terms and conditions to me "materially interferes" with my ability "to understand a term or condition of a consumer financial product or service." The CFPB has been very sparing in bringing actions under the "material interference" prong, but this sort of non-disclosure disclosure squarely fits within the pattern of material interference cases, where defendants have undertaken actions that undercut the effectiveness of disclosures.

Here BoA made a disclosure, but it made it in a form and a context where I cannot possibly understand the terms and conditions: the disclosure is made to me solely on my mobile phone; it's a long disclosure that cannot all be read in a single screen; it's made when I'm already prepared to undertake a transaction, so I am primed to accept the terms in order to do the transaction (and not have an endorsed check lying around); it's made without any explanation of what is new or different in the terms; and it's made without my ability to print or save it, such that if I wanted to compare it to older terms (if I somehow had them) that I would be able to readily do so. Notice, "material interference" has no requirement whatsoever of consumer harm. The harm is presumed in that if I cannot understand the terms or conditions, I am going to over- or under-consume because I lack the information necessary to properly price my consumption level.

I think "material interference" is the strongest case here, but this practice might also fall under the prongs of "abusive" that prohibit taking "unreasonable advantage of" either my "lack of understanding" "of the material risks, costs, or conditions of the product or service;" or my inability to protect my interests in selecting or using the product. Perhaps taking unreasonable advantage is a materiality requirement like "substantial injury," although the harm threshold seems lower; indeed, no harm is required, just an unreasonable benefit to BoA. Perhaps getting my consent is alone that benefit, but as with unfairness, I think this is a place where the application is awkward. But again, as with unfairness, if we get past that obstacle, then the rest of the provision seems to apply.

In any case, I would not expect to see a CFPB enforcement action over this sort of issue, but I would strongly hope that this issue would be resolved through the supervisory process: the CFPB really ought to tell BoA that it:

(1) should not be doing account term changes over mobile devices, period, but needs to use either snail mail or desktop formats;

(2) should indicate clearly what terms have actually changed (perhaps via a redline or just a summary of the changed terms); and

(3) must always give consumers an option to print, email, or save account terms prior to the consumer accepting the terms.