Proposed “Justice For Victims Of Fraud Act” Would Take Away Wells Fargo’s Get Out Of Jail Free Card

Wells Fargo has admitted that millions of its customers were victimized by bank employees who opened unauthorized accounts in these customers’ names, but those fake account fiasco victims can’t file lawsuits against the bank because of clauses buried in their account contracts. A newly introduced piece of legislation would prevent Wells Fargo from using that clause to minimize its responsibility under the law.

Wells — just like many major banks — has a mandatory arbitration clause in its contracts that not only requires that disputes be heard outside of the legal system through private arbitration, but also bars customers from joining with other wronged individuals to have their dispute heard as a class action. Thus, each of the millions of Wells’ victims would have to go through arbitration on their own.

Some lawmakers have called on the bank to not exercise its authority to use this clause, but the bank has not given any indication it won’t use the contract terms to shut down class actions.

Today, Rep. Brad Sherman (CA) and Sen. Sherrod Brown (OH) introduced the “Justice for Victims of Fraud Act,” intended to bar Wells Fargo from applying its mandatory arbitration clauses with regard to these victims.

The bill would also require that a judge make a decision in public about whether an account was fraudulently opened, rather than having each determination being made privately by an arbitration panel.

“If a customer never authorized the opening of a credit card or checking account, that same customer should not be bound by an arbitration agreement for a separate, legitimate account,” said Sherman. “Cheated customers should have the choice to opt out of phony contractual arbitration provisions and seek justice in court.”

Adds Brown, “Forced arbitration is shielding Wells Fargo from being held accountable for tanking customers’ credit scores and charging them fraudulent fines. Wells Fargo’s customers never intended to sign away their right to fight back against fraud and deceit.”

This legislation is being supported by a number of consumer advocacy organizations, including our colleagues at Consumers Union, along with the American Association for Justice, the National Consumer Law Center, Americans for Financial Reform, the Center for Responsible Lending, and the NAACP and others.

It has to be noted that this bill — without bipartisan support and with an apparently pro-bank administration coming into the White House — faces an uphill battle and may not even make it past the committee stage, but it does shine a spotlight on the fact that banks and other businesses are able to sidestep liability through arbitration agreements that most customers don’t even know about.

by Chris Morran via Consumerist