Wells Fargo Killing Sham Account Suits by Using Arbitration
[Jennifer] Zeleny, a lawyer who lives outside Salt Lake City and opened a Wells Fargo account when she started a new law practice, said it would be impossible for her to agree to arbitrate her dispute over an account that she had never signed up for in the first place.
The bank’s counterargument: The arbitration clauses included in the legitimate contracts customers signed to open bank accounts also cover disputes related to the false ones set up in their names.
Arbitration is reasonable on a case-by-case basis but it’s a hard concept to defend:
- Ideologically, when a corporation is responsible for the deliberate mass-deception of its customers
- Contractually, when the affected customers never agreed to anything at all with regard to the accounts at issue
If Wells Fargo has any intellect in the board room or in the C-suites they’re taking this tough stance in public but working quietly on negotiating a mass settlement fund.
Of course, any intellect in the board room or the C-suites would likely prevent the type of sales environment which catalyzed this large-scale fraud and identity theft operation.
CFPB proposes ban of class action prohibitions in arbitration clauses
The Consumer Financial Protection Bureau said in a press release today:
In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress required the CFPB to study the use of arbitration clauses in consumer financial markets and gave the Bureau the power to issue regulations that are in the public interest, for the protection of consumers, and consistent with the study’s findings. The CFPB’s study – released in March of this year – showed that arbitration clauses restrict consumers’ relief for disputes with financial service providers by allowing companies to block group lawsuits.
The study also found that, in the consumer finance markets studied, very few consumers individually seek relief through arbitration or the federal courts, while millions of consumers are eligible for relief each year through group settlements. According to the study, more than 75 percent of consumers surveyed in the credit card market did not know whether they were subject to an arbitration clause in their contract. Fewer than 7 percent of those consumers covered by arbitration clauses realized that the clauses restricted their ability to sue in court.
The March 2015 CFPB report on this issue (PDF) said:
The Bureau understands that class lawsuits have been subject to significant criticism that regards them as an imperfect tool that can be expensive and cumbersome for all parties. However, the Bureau notes that Congress, state legislatures, and the courts have mechanisms for managing and improving class procedures over time. On balance, the Bureau believes that consumers are significantly better protected from harm by consumer financial service providers when they are able to aggregate claims. Accordingly, the Bureau believes that ensuring that consumers can pursue class litigation related to covered consumer financial products or services without being curtailed by arbitration agreements protects consumers, furthers the public interest, and is consistent with the Study.
Class action lawsuits can be a pain in the ass for everyone involved and the only winners are the plaintiffs’ lawyers. But the mere possibility of a class action may be enough to prevent predatory behavior on the part of service providers.