Senator Sherrod Brown (D-OH) said Monday he plans to introduce a bill that would bar Wells Fargo from shielding itself behind forced arbitration clauses buried in consumer contracts. The bill would make it easier for customers to sue Wells Fargo for compensation and damages resulting from fake accounts the bank opened without their consent.
Sen. Brown, Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs, has joined the chorus of lawmakers and other officials, including Democratic Presidential candidate Hillary Clinton, in condemning Wells Fargo for defrauding its own customers, then denying them a day in court.
On Monday, Hillary Clinton addressed a crowd in Toledo, Ohio, about Wells Fargo’s practice of pressuring its employees to open the fake accounts to meet sales quotas. The scheme was so common that it led to the creation of about two million checking, savings, and credit card accounts using customers’ personal information. The bank then charged customers fees for maintaining the accounts.
Wells Fargo has been able to get away with this fraud because it includes mandatory arbitration clauses in the fine print that its customers must sign when opening a legitimate account. These “gotcha” agreements, as Clinton called them, require customers to waive their legal right to trial. Complaints are handled in out-of-court arbitration, led by a mediator selected by Wells Fargo. The majority of such arbitration agreements are settled in the defendant’s favor.
“Secret arbitration proceedings allowed Wells Fargo to get away with this fraud for far too long already,” Sen. Brown said in a statement. “And even now that it’s out in the open, Wells Fargo still hasn’t given us straight answers as to how long this fraud went on, exactly how many customers were hurt, or how the bank will restore damaged credit scores that could end up costing customers thousands of dollars.”
During questioning at a Senate hearing in September, Wells Fargo CEO John Stumpf refused to answer Sen. Brown’s questions and told the House Financial Services Committee that the bank will continue this practice. Sen. Brown said the bank was being “downright hostile” to the customers it cheated.
The bill Brown is drafting will work hand-in-hand with a new oversight rule that the Consumer Financial Protection Bureau (CFPB) put out in May to strengthen protections for consumers. Whereas the CFPB proposal would apply only to contracts signed after the rule is final – Brown’s bill would allow existing Wells Fargo customers to sue even if they signed contracts that included arbitration for their legitimate accounts in the past, potentially allowing them to recoup damages for negative effects on their credit score and borrowing costs.
Sen. Brown says he plans to introduce the proposed bill when Congress returns from the current recess after the November election.