Editorial: Bills place best interest of banks over customer rights

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The (Fort Wayne) Journal Gazette

Two bills winding through the Indiana General Assembly should concern every Hoosier with a checking and savings account. If adopted and signed into law, the proposals would reduce consumer protections statewide.

Anderson Republican Rep. Kyle Pierce’s House Bill 1284 would allow banks to amend contract terms without written consent from their customers. Although it overrides two 2023 opinions by the Indiana Supreme Court, the bill passed its first hearing in the Insurance and Financial Institutions Committee Wednesday on a 6-3 vote.

A corresponding proposal, Senate Bill 188, authored by Noblesville Republican Scott Baldwin, would drastically curtail the statute of limitations for bank customers to sue financial institutions. It passed out of the same committee as HB 1284 last month on a 7-2 vote but hasn’t been scheduled for a hearing.

According to Erin Macey, director of the Indiana Community Action Poverty Institute, the bills are a way around Indiana Supreme Court rulings from last year’s Decker v. STAR Financial and Land v. IU Credit Union that favored consumers. Both decisions say financial institutions must notify their customers of changing terms, but take that mandate a step further.

“(The justices) said certain changes or additions to a contract require affirmative consent,” Macey told The Journal Gazette Tuesday. “You can’t just send a notice and then accept silence as a person consenting to the change or addition you want to make.”

But that’s the intent of HB 1284, giving banks the power to make substantial changes to their contracts with customers by simply sending a written notice and interpreting a failure to close their account as evidence of their customers’ acceptance of the changes.

“If we give depository institutions this kind of permission, are other folks going to want to come and get permission to change or add to a contract, like hospitals or lawyers?” Macey asked.

SB 188, on the other hand, would limit the time frame Hoosiers have to hold their banks accountable for issues such as unfair overdraft fees, despite a Pew Charitable Trusts survey from 2016 that found 95% of U.S. respondents supporting the ability to resolve banking disputes in court.

In 2021, lawmakers reduced the statute of limitations on deposit accounts from 10 years to six years. SB 188 would further cut the statute of limitations to two years.

In committee, Macey said that shortening the length of time people had to litigate would not only discourage class-action lawsuits but also make it harder for individuals to sue their banks for excessive overdraft fees.

She pointed to the National Credit Union Administration, which last month urged credit unions in Indiana to reconsider their overdraft protection programs to align with the mission to empower impoverished communities.

“All I know is, if I’m an individual in Indiana and I find out my bank has done something wrong … and I’m limited to two years of damages as opposed to six years of damages, I think all of us would be very angry about that,” Sen. Aaron Freeman, R-Indianapolis, told the Senate Committee on Insurance and Financial Institutions. Yet he still voted to advance the bill, only to vote against it in a Senate floor vote.

The consequences of SB 188 could be much more dire for small businesses. Most have electronic checking, payroll, invoicing and automatic deductions to pay suppliers. If they receive notice their banking terms are changing, they would be forced to close all associated accounts to refuse the changes, imperiling commerce until new accounts are opened at a different bank.

House Bill 1284 and Senate Bill 188 are legislative ways to circumvent Indiana Supreme Court rulings that bank contracts cannot be changed without the affirmative consent of consumers. Both make it harder for Hoosiers to sue when they believe they’ve been wronged, a terrible standard other industries would likely seek in future legislative sessions.

The bills place the best interests of banks over the right of customers to resolve legal and financial disputes in court. They should be defeated or at least assigned to a summer study committee for further review.