Wells Fargo CEO refuses to release customers from arbitration after fraud

posted on:
September 30, 2016


Banking, Fraud

In testimony before the U.S. House Financial Services Committee on Sept. 29, Wells Fargo Chairman and Chief Executive John Stumpf testified that he would hold customers caught up in a massive fraud scheme to binding arbitration agreements, refusing them their day in court.

“Every day, thousands of consumers sign away their Seventh Amendment right to trial by jury because of forced arbitration,” explains Beasley Allen lawyer W. Daniel “Dee” Miles, III. “These clauses are widely used by banks, internet providers, retailers and numerous other businesses. Most people don’t even know they are agreeing to give up their constitutional rights. In many cases, they don’t even know an arbitration clause is in the document they sign. In the case of a dispute, the arbitration firm will be chosen by the company, putting the individual at a distinct disadvantage. Instead of having a remedy through the court system, arbitration leaves the individual powerless, with a limited ability to present evidence or appeal an unjust decision. It’s totally unfair to individuals who have been wronged,” Miles says.

In early September, federal regulators revealed an investigation had uncovered a massive fraud scheme at Wells Fargo. Officials from the Consumer Financial Protection Bureau (CFPB) said Wells Fargo employees secretly created millions of unauthorized bank and credit card accounts in customers’ names, without their permission or their knowledge, beginning as early as 2011. As a result of the fraud, CFPB officials say, bank employees were able to collect fees and earn bonuses for creating new accounts. The phony accounts also were used to boost stock value by falsely representing positive penetration rates and company growth.

Arbitration is under fire in other areas, with positive strides being made to eliminate this unjust practice. Just days ago, the Centers for Medicare and Medicaid Services (CMS) finalized a rule that will ban nursing homes and long-term care facilities from requiring residents/patients to sign pre-dispute mandatory arbitration agreements as a condition for receiving federal money through Medicare and Medicaid. They can no longer enforce arbitration agreements and prevent people from filing a lawsuit over medical negligence.

“Once again, this issue is in the national spotlight, and there is real opportunity to rid consumers of mandatory binding arbitration agreements that strip them of their rights,” Miles says. “Everyone needs to urge the CFPB to eliminate arbitration clauses from banking agreements. These clauses are in contracts for services that people need, and in many cases cannot do without. That is fundamentally unfair, and places the consumer over a barrel.”

New York Times
Los Angeles Times

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