It’s a revelation that has enraged consumers and consumer advocates alike. Since at least 2011, Wells Fargo has been surreptitiously opening millions of fraudulent deposit and credit card accounts in the names of existing customers. The reason? Pressured to meet quotas that called for Wells Fargo clients to have multiple banking products, employees started opening new accounts without client permission or knowledge. They even went so far as to forge signatures on application and consent forms. As a result, Wells Fargo has taken in at least $2.6 million from fees connected to these illegitimate accounts.
In September federal regulators stepped in, and Wells Fargo agreed to settle the case for $185 million. Thousands of employees were fired, and CEO John Stumpf was told during a Senate Banking Committee hearing that he should resign and be criminally investigated.
So why did this fraudulent practice take so long to uncover? In short: the Wells Fargo arbitration clause.
Arbitration Clauses: What They Are and What They Mean
Individual customers did attempt to sue the bank for creating accounts without their knowledge or permission, but the contract they signed when they created their original accounts forfeited their right to have any disputes handled in a court of law. Carefully-worded clauses protected Wells Fargo from both individual litigation actions and class action lawsuits, and forced affected customers to go before an arbitrator chosen by the bank. Judges have repeatedly upheld Wells Fargo’s mandatory arbitration even in the face of the systemic illicit fraud being carried out by its employees. In many ways, the courts have upheld Wells Fargo’s “right” to cover up illegal activity through arbitration.
The Tyranny of Forced Arbitration
Forced arbitration makes it easy for corporations and banks like Wells Fargo to swindle consumers because there is so much secrecy involved. Each person has to detect the scam on their own, figure out what their rights are, and then face a multi-billion-dollar corporation individually, and without the ability to bring of class action. Even those who make it to that point end up before an arbitrator. Arbitration proceedings are private, so the arbitration proceeding itself may not make the scam public; whereas, if this case were filed a in public court, these types of claims will almost always be caught by the press, consumer watchdog groups, other consumers, other consumer attorneys, etc. To make matters even worse, arbitrators are generally not required to adhere to the same legal standards when they make decisions as a judge in a litigated case; and, generally, the consumer has no right to appeal an erroneous decision on the law.
Fortunately, the Consumer Financial Protection Bureau has recently proposed new rules that would limit forced arbitration and make it easier for consumers to launch a class action lawsuit. Lawmakers are presently considering these proposals which, if approved, would provide consumers with a better chance of winning a recovery for all affected consumers against an institution the size of Wells Fargo.
If you have been duped by a bank or other large corporation and are unsure of your rights or how to proceed, contact the consumer protection attorneys at Bell Law today. We will evaluate your case, advise you on the best options, and make protecting your rights our number one priority.
