Let’s say that you open a new checking account this year. You ask your banker about the basics – is there a monthly fee? Other fees? A minimum account balance? Satisfied with the answers, you sign several pages worth of legal gobbledygook and go on your way, new checks in hand.

Now let’s imagine that you start finding unexplained fees in your statements -- $13 one month, $2.50 the next month. Worse yet, you experience what many Wells Fargo customers came up against. You start getting collections calls for fees on accounts in your name, at your bank, but not the account you recall opening.

Of course, your first step is to contact your bank to ask them to resolve the situation. But what if they don’t? You close the offensive account at some point, so your monetary damage might be minimal-- $100, $25. It’s enough to piss you off but not enough so that you’d go and hire an attorney. Most of us will accept the loss, albeit with some resentment, and move on with our lives.

But let’s just say that these extra fees become a regular practice at the bank – they take a little extra from a lot of customers and get away with it because no particular customer will find the battle worthwhile. In passing the Dodd-Frank Wall Street Reform and Consumer Protection Act several years ago, Congress asked the Consumer Finance Protection Bureau to look into whether this was exactly what was happening. And here is what the CFPB found: 1. Over a 5 year period, class action lawsuits (in which consumers with the same type of claim against a bank could be grouped together) returned settlements worth $2.7 billion in cash, in-kind relief and legal expenses to consumers in the U.S.; 2. During the same period, over 160 million people were eligible to participate in a class action lawsuit based on suspect practices by their banks; and 3. Very few individuals pursued their banks for wrongdoing if there was no class action available.

The CFPB study makes obvious why class action suits exist in the first place. They make it practical for Americans to hold large corporations to their contracts and their legal duties. In doing so, they create an incentive for those corporations to follow the law in the first place.

And that is where arbitration clauses come in. If you have a bank or investment account, you have probably signed something saying that you agree to give up your right to sue the bank if it violates the law or your contract. Instead, your complaint will be funneled to a private individual or company that will hear and arbitrate your case. Arbitration, which was originally designed to create a cheaper, faster, less formal legal process, has ended up being another barrier to getting your case to an actual court. And in almost all cases, arbitration clauses eliminate your legal right to file as part of a class action.

Not surprisingly, then, the CFPB report also concluded that all of these arbitration clauses have let our banks get more careless with the law and their clients’ wellbeing. Which, in the end, means that each of us will likely pay a little extra here and there over the course of our adult lives in unexplained fees, undelivered services and general aggravation. And for all of us as a group, that will all add up to billions of dollars.

The CFPB has proposed to Congress a broad ban on the use of arbitration clauses in finance products. For CFPB’s explanation of the rule, see here. Housing Wire’s article on the proposed rule and it’s review in front of Congress, see here.