Friday, December 9, 2016

Wells Fargo Arb Clauses Fair Game in Fraud Cases?

The well-publicized Wells Fargo fraudulent account creation cases are being defended with lawyers arguing for application of arbitration clauses signed when customers opened their legitimate accounts. Plaintiffs argue the cases should be in court rather than arbitrated. Now Congress may weigh in with legistlation to carve out the cases. Lawmakers want consumers to be able to sue the bank in court over the fake account scandal rather than go through private arbitration. A bill introduced by Senate Banking Committee Ranking Minority Member Sherrod Brown and Congressman Brad Sherman called the Justice for Victims of Fraud Act of 2016 goes against the mandatory arbitration clauses that prevent customers from suing Wells Fargo. The case is pending in the U.S. District Court in Utah which has been asked in a motion to dismiss to order customers suing the bank to resolve their issues via arbitration. Wells Fargo is reportedly providing mediation services to affected customers for free. According to the bank, if a resolution is not reached, the arbitration clause allows for a forum in which customer disputes are heard and resolved quickly and efficiently with a neutral, third-party. This is the first class action lawsuit filed against Wells since it agreed to pay a $185 million penalty and return $5 million to customers for opening up to two million deposit and credit-card accounts in their names without their permission. The penalty by the Consumer Financial Protection Bureau (CFPB) is the largest fine levied from the government agency over account opening practices. 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. Obviously, a new Congress and President next month could stymie this effort. See more here--