Banking

New Bill Would Throw Out Wells Fargo Arbitration Clause

Wells Fargo customers got support from two Democrat lawmakers, who want consumers to be able to sue the bank in court over the fake account scandal rather than go through private arbitration.

The bill, which was introduced by Senate Banking Committee Ranking Minority Member Sen. Sherrod Brown (D-OH) and Rep. Brad Sherman (D-CA), is dubbed the Justice for Victims of Fraud Act of 2016 and fights back against the mandatory arbitration clauses that prevent customers from joining class-action lawsuits or suing Wells Fargo.

“Forced arbitration is shielding Wells Fargo from being held accountable for tanking customers’ credit scores and charging them fraudulent fines,” said Sen. Brown in a release announcing the bill. “Wells Fargo’s customers never intended to sign away their right to fight back against fraud and deceit. We need to give customers back their ability to seek justice in court so they can be made whole again.”

In late November, Wells Fargo filed a motion asking a judge in U.S. District Court in Utah to order customers suing the bank to resolve their issues via arbitration. In a Reuters report, a Wells Fargo spokesman said the bank is providing mediation services to affected customers for free. “If a resolution is not reached, the arbitration clause … allows for a forum in which a customer has his or her dispute heard and resolved quickly and efficiently within a neutral, third-party legal process,” the spokesman told Reuters. Reuters noted the bill introduced by the two politicians faces an uphill battle to get passed.

In September, the Consumer Financial Protection Bureau fined Wells Fargo $185 million, the largest fine levied from the government agency, over its account opening practices. It also ordered Wells Fargo to refund $5 million in fees that the bank wrongly charged customers. According to an investigation by the CFPB, Wells Fargo employees not only made fake deposit accounts but also submitted 565,443 unauthorized credit card account applications on behalf of unknowing customers. It’s estimated that 14,000 of those accounts accrued $403,145 in fees. Through its own independent investigation, the bank discovered a total of $2.6 million in unauthorized fees. The scandal has engulfed Wells Fargo, resulting in the ouster of Chief Executive John Stumpf and the launch of a series of investigations.

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