Will victims in bank scandal get their day in court?By Nisa Islam Muhammad -Staff Writer- | Last updated: Dec 14, 2016 - 11:45:56 AM
Wells Fargo is trying to use forced arbitration clauses hidden in the fine print of contracts customers signed when they opened legitimate accounts to block them from suing as a result of the fraudulent accounts bank staff opened.
“Forced arbitration is shielding Wells Fargo from being held accountable for tanking customers’ credit scores and charging them fraudulent fines,” explained Sen. Brown in a released press statement. The legislation was introduced Dec. 1.
“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.”
Victims of the fraudulent scandal have an advocate in Sen. Brown. He has lead the charge in the Senate to push Wells Fargo to stop the practice of forced arbitration. But after refusing to answer his questions at a Senate hearing in September, Wells Fargo CEO John Stumpf told the House Financial Services Committee that the bank will continue this practice, which Sen. Brown called ‘downright hostile’ to cheated customers.
The Justice for Victims of Fraud Act of 2016 will work with the new oversight rule that the Consumer Financial Protection Bureau (CFPB) proposed last May to strengthen protections for consumers.
The proposal has limitations since it only applies to contracts signed after the rule is final, however this bill would allow victims of Wells Fargo’s fraud to have their say in court even if they signed contracts that included arbitration for their legitimate accounts in the past.
“Few Wall Street practices are as abusive, unfair, and deceptive as the widespread use of forced arbitration,” American Association for Justice President Julie Braman Kane explained in a statement.
“These clauses, which are hidden in millions of financial contracts, force consumers into a rigged, secretive system set up by powerful corporations to hide wrongdoing and evade accountability.”
Since at least 2011, more than 5,300 Wells Fargo employees, recently fired, opened approximately 1.5 million accounts as high as two million and applications for approximately 565,000 credit cards without the knowledge or consent of their customers.
When these customers attempted to hold the bank publicly accountable in court, Wells Fargo systematically funneled the cases into a secret, binding forced arbitration forum where the dispute would be decided by a private company chosen by Wells Fargo. The secretive nature of forced arbitration allowed the bank to hide its wrongdoing from the public for years.
The CFPB fined Wells Fargo $100 million, its largest penalty, for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts. Motivated by outrageous, nearly impossible sales targets that had wildly attractive compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges.
“I had managers in my face yelling at me,” Sabrina Bertrand, who worked as a licensed personal banker for Wells Fargo in Houston in 2013, told CNNMoney. “They wanted you to open up dual checking accounts for people that couldn’t even manage their original checking account.”
The fraud didn’t end there. The bank issued fake ATM cards and assigned PIN numbers without client approval. A lawsuit was filed by Los Angeles against Wells Fargo in May 2015. According to the lawsuit, bankers would impersonate their customers and, “input false generic email addresses such as firstname.lastname@example.org, email@example.com, or firstname.lastname@example.org to ensure the transaction is completed.” All while the customer remained in the dark.
The Justice for Victims Fraud Act has been endorsed by the Consumers Union, the National Association of Consumer Advocates, the National Consumer Law Center (on behalf of its low-income clients), Americans for Financial Reform, the NAACP, Media Voices for Children, Allied Progress, the Woodstock Institute, the Franciscan Action Network, the Economic Policy Institute Center, California Reinvestment Coalition, Consumers for Auto Reliability and Safety, National Consumers League, and Public Justice.
“This legislation gives these defrauded customers the opportunity to seek justice in court and is a step in the right direction in bringing fairness to consumer finance. Forced arbitration should not shield Wells Fargo from its deliberate efforts to defraud their customers,” said Center for Responsible Lending (CRL) Senior Policy Counsel Melissa Stegman.
“Opening fraudulent accounts is not the only abusive tactic Wells Fargo has committed—they are also notorious for manipulating transactions in order to charge excessive overdraft fees to their customers. CRL applauds Senator Brown and Congressman Sherman for their strong leadership in protecting consumers.”