Consumer Banking

When banks provide financial services to average, ordinary people, as opposed to businesses, they are engaged in consumer banking. The services included in consumer banking include credit card services, checking and savings accounts and personal loans. Consumer banks also provide mortgage loans and certificates of deposit (CODs).

Can You Sue a Bank for Disclosing Personal Information?

A federal law known as Gramm-Leach-Bliley Act (GBLA) regulates how banks may handle consumer information. Under the GLBA, consumer banking customers have rights with respect to the privacy of their nonpublic personal information (NPI). Basically, if a bank shares a person’s nonpublic personal information with another entity, a person can file a complaint with the Federal Trade Commission (FTC).

Nonpublic personal information includes information consumers provide to banks in the course of applying for a financial product or service, such as a mortgage loan. It also includes information that banks obtain about a customer in the course of conducting a financial transaction with the customer. Examples of NPI may include:

• Income: A person’s income is clearly personal information;
• Monthly Expenses: A person’s monthly expenses are personal information as well;
• Social Security Number: Of course, a person never wants their social security information made public or shared without their knowledge and consent;:
• Other information on an application for a credit card or bank account.

To be considered NPI, the information must be information that is not publicly available. Publicly available information is information that appears in public records, such as telephone books, land records, and driver license information available from state motor vehicle departments.

The GLBA requires banks to tell customers about what kinds of information the banks collect. It also requires banks to share with customers the businesses to which the bank may provide the information. If a bank intends to share a person’s NPI with another entity, the bank must give the person the choice to ‘opt out.” This means that a person has the right to refuse the sharing of their NPI with anyone.

The bank is legally obligated to honor a person’s opt-out request. Consumers generally may block the bank from sharing NPI with outside companies. As mentioned above, if a bank does share NPI, whether negligently or intentionally, a consumer may file a consumer complaint with the FTC.

The FTC investigates complaints filed by consumers. If the FTC’s investigation reveals that the bank has violated the GLBA, the FTC may penalize the bank and bank employees who are responsible for the violation. Penalties can include monetary fines and even prison time for bank employees who are responsible for the violation. The GLBA does not authorize private rights of action; that is, individuals cannot file private lawsuits against a bank in civil court for a GLBA violation.

Can You Sue a Bank for Denying a Loan?

Under some circumstances, a person would be able to sue a bank for its refusal to provide them with a loan. For example, if a bank has denied a person a loan for a discriminatory reason, i.e. on the basis of the person’s membership in a protected class, that would be the basis for a lawsuit. Protected classes are race, color, national origin, gender, religion and other factors as well.

A person would file their lawsuit in a federal district court. To succeed with such a lawsuit, the person would have to prove the bank intentionally discriminated against them on the basis of their membership in a protected class, again, for example, race, gender, color, or national origin. This can be a difficult undertaking that requires proper proof and evidence; an attorney can assist with these types of claims.

When Can You Sue a Bank?

A person may also be able to sue a bank when a specific law allows them to do so. Three federal laws that guarantee rights to consumers are the Truth in Lending Act (TILA), the Fair Debt Collection Practices Act (FDCPA), and the Fair Credit Reporting Act (FCRA). Under the TILA, banks must provide consumers with accurate information about their credit transactions with the bank. This means banks must provide accurate information about the rate of interest, monthly payment, and other clearly relevant information about mortgages and credit loans that a customer may seek.

Under the FDCPA, banks may not, among other things, harass a person who owes a debt to a bank, or share inaccurate information in an attempt to collect a valid debt. Under the FCRA, a person may be able to sue a bank because it has refused to remove false information that it has placed on their credit report.

Eligibility: In order to sue a bank for discriminatory lending, you generally first need to show that you’re part of a protected group, such as race, gender, or religion. Next, you need to show that the bank’s actions were driven by bias tied to that status. You must also have some evidence that discrimination occurred, though the exact requirements can differ depending on the laws that apply to your situation.

Speaking with an attorney can help you understand whether your circumstances meet the legal standards for filing a claim.

Evidence/Documents: Beyond financial records, proving discriminatory lending often requires showing patterns or behavior that point to unequal treatment. Useful evidence can include emails or letters exchanged with the bank, notes from conversations, internal policies or marketing materials that suggest bias, statements from witnesses, and any materials that highlight how you were treated differently from comparable applicants.

Importantly, the exact evidence needed depends on the laws and the specifics of your claim.

Timelines: It is important to note that statutes of limitations do apply to discrimination claims against banks, and these statutes set the deadline for filing a lawsuit. The exact time limit depends on the type of discriminatory banking violation and the laws in your state or under federal statutes, meaning the window to sue can vary widely.

Because missing the deadline can permanently block a claim, it’s important to speak with an attorney who can identify the specific filing period that applies to your situation.

Process/Steps: Before suing a bank, a consumer can start by collecting all relevant records, such as account statements, correspondence, and a clear timeline of what happened. They can then attempt to resolve the issue directly with the bank or through a regulatory complaint if appropriate.

They may also choose to file a report with the agency that oversees the type of violation involved, and consult an attorney to understand their legal options and whether a lawsuit is the right next step.

The Importance of Hiring a Lawyer: As can be seen, straightforward consumer banking issues, like small disputes over incorrect fees, minor account errors, or simple service problems, are often manageable without hiring a lawyer. However, once a case involves complex regulations, major financial harm, or allegations of discrimination or misconduct, the legal and procedural stakes rise quickly, making professional representation far more important.

How Do You File a Lawsuit Against a Bank?

Other than under the circumstances listed above, individuals usually may not sue a bank in civil court, unless a specific law permits it. However, under some circumstances, an individual may be able to sue a bank in small claims court. Small claims courts are specialized courts that hear claims involving relatively small amounts of money, e.g. $10,000 or less. Every state has a small claims court system with its own limitation on the amount of damages that can be sought and filing procedures.

Generally, to file a claim in small claims court, a person must file a document known as a complaint. The bank must receive a copy. The bank may then file an answer. Once the court has copies of the complaint and the answer, the court will set a trial date. At the trial, each side presents their evidence. The court then makes a decision.

Types of claims that can be filed against a bank include claims under which the bank owes a person money and refuses to pay. For example, if a bank, in penalizing a person for insufficient funds, charges them the penalty fee three times instead of once, the person can sue to recover the money the bank improperly took out. An insufficient funds penalty is charged by the bank if a customer writes a check when the customer does not have the money in their checking account to cover the check.

If a person should believe that they have a legitimate claim against a bank that is possibly worth more than the small claims court limit, they would want to consult a civil litigation attorney to discuss their options.

What Are Other Considerations Regarding Consumer Banking?

Costs/Fees: Filing a consumer lawsuit against a bank can involve several expenses, including court filing fees, attorney fees, and costs for expert witnesses or other litigation needs. Lawyers may charge by the hour, a flat rate, or work on a contingency basis depending on the case. Because these costs can add up quickly, it’s wise to discuss potential fees and payment structures with an attorney before moving forward.

State Variations: State laws can shape how a consumer can sue a bank, since each state sets its own rules on banking practices, available legal remedies, and the procedures required to bring a claim. These differences can also affect filing deadlines and what types of protections or causes of action are recognized.

Risks/Penalties: If a consumer sues a bank and loses, then they may end up responsible for court costs and, in some cases, the bank’s legal fees in addition to their own. There’s also the possibility that the bank could file counterclaims, creating further financial or legal exposure.

Because the risks can escalate quickly, it’s important to realistically evaluate the strength of the case and the potential consequences before moving forward.

Do I Need a Lawyer to Sue a Bank?

As you may imagine, suing a bank would not be an easy task, even if you believe that right is on your side. If you believe that a bank has violated your rights, you should consider contacting a financial lawyer near you.

Before you contact the attorney, you should gather information about your claim that the attorney will want to know. This information includes all documentation relating to your claim, including financial documents. A summary of events that have taken place in connection with your case, including dates, would also be helpful.

An experienced bankruptcy lawyer can explain your rights and options. The lawyer can also assist you in preparing a lawsuit and can represent you in court. State laws on banks may vary, so it’s important to work with a lawyer who can explain the laws in your area clearly.