RELEASE: Wells Fargo Settlement Highlights Importance of Class Actions, Dangers of Forced Arbitration
FOR IMMEDIATE RELEASE
March 29, 2017
Jan Kruse, National Consumer Law Center, [email protected]
Christine Hines, National Association of Consumer Advocates, [email protected]
Laurie Kinney, Alliance for Justice, [email protected]
Sarah Jones, American Association for Justice, [email protected]
Amanda Werner, Public Citizen, [email protected]
Wells Fargo Settlement Highlights Importance of Class Actions, Dangers of Forced Arbitration
This week’s announcement of a proposed $110 million class action settlement for consumers harmed by Wells Fargo’s fraudulent bank account scheme highlights both the importance of class actions and the dangers of forced arbitration clauses in consumer contracts, according to members of the Fair Arbitration Now coalition. Congress has been considering bills to curtail class actions, and the Consumer Financial Protection Bureau is expected to release a rule this spring to ban forced arbitration clauses that have class action bans in financial contracts.
“People harmed by massive fraud should not have to wait this long,” said Nan Aron, President of Alliance for Justice. Customers of Wells Fargo brought class actions as early as 2013, but the bank successfully claimed that the fine print of actual account agreements prevented them from suing over the fraudulent contracts. “Wells Fargo used forced arbitration clauses and class action bans to prevent courts from holding the bank accountable for the full breadth of the scandal, and instead forced people to go one by one into a secretive and biased process,” said Ms. Aron.
As early as this month, Wells Fargo was still trying to block several class actions and force people into individual arbitrations. Courts had not yet ruled on the bank’s request to dismiss the class actions and send the cases to individual arbitration. The settlement still needs to be approved by a court.
“This case shows how forced arbitration clauses and class action bans deny people justice. The victims of Wells Fargo’s fraud will undoubtedly get less than they would have if the bank wasn’t holding a forced arbitration hammer over their head. There was the very real possibility that the court would have dismissed these cases entirely – not because Wells Fargo was innocent, but because of the fine print of its contracts,” said Paul Bland, Executive Director of Public Justice.
“Corporations like Wells Fargo that commit widespread wrongdoing should not get to dictate when they will participate in the civil justice system or when they will require consumers to resolve their complaints in individual secret arbitration. Consumers should have the choice to band together in court to address misconduct,” said Christine Hines, Legislative Director for National Association of Consumer Advocates.
“This announcement shows why class action rights are so necessary to our civil justice system,” said Lisa Gilbert, Vice President of Legislative Affairs for Public Citizen. “Since most consumers simply give up when forced into arbitration, these rip-off clauses give banks a license to steal without consequence.”
Wells Fargo found that its business was continuing to suffer from the scandal. This week, its regulator gave the bank a rare “needs to improve” rating under the Community Reinvestment Act. Wells Fargo also continues to face a campaign for people to move their money out of the bank until the bank agrees to drop forced arbitration clauses in all cases.
“Settling this one case is not enough. Wells Fargo must get rid of its forced arbitration clauses and commit not to enforcing the ones it has. The bank has engaged in a string of misconduct – from illegally repossessing cars or foreclosing on military servicemembers to using unfair and deceptive practices to increase overdraft fees – that goes far beyond this case,” said Lauren Saunders, associate director of the National Consumer Law Center.
In February, a broad-based coalition of groups called on Wells Fargo’s CEO Timothy Sloan to cease forcing its customers and workers to submit to forced arbitration. The group unveiled a new website, WeDOCount.org, focusing on the campaign to make the switch from Wells Fargo to more consumer-friendly banks or credit unions.
“Wells Fargo will eventually put this scandal behind it, but wrongdoers will continue to block justice and deny victims their day in court until we end forced arbitration. The Consumer Financial Protection Bureau must finalize its forced arbitration rule and Congress must pass the Arbitration Fairness Act,” said Julia Duncan, director of federal programs for the American Association for Justice.