From Press Release – A bill by Senator Bill Dodd (D-Napa) to protect victims of mass fraud and identity theft passed the state Senate on Tuesday. Dodd’s bill was introduced in response to the recent Wells Fargo scandal where millions of accounts were fraudulently opened without consent, using consumer’s personal information from preexisting accounts. The legislation, co-sponsored by California State Treasurer John Chiang, would give victims their day in court by preventing financial institutions from using forced arbitration clauses in cases of fraud committed by the institution.
“My bill will bring justice for victims of bank fraud and help prevent future fraud, before it spreads,” said Senator Dodd. “The idea that consumers can be blocked from our public courts when their bank commits fraud and identity theft against them is un-American. Allowing victims their day in court helps them recover and can prevent more victims by putting an end to illegal business practices. If SB 33 was already law, Wells Fargo would have been publicly held to account years ago, preventing the fraud from spreading.”
Late last year it came to light that Wells Fargo Bank employees had fraudulently used their customers’ personal information to create over two million fake accounts without consent over the course of five years. Recent reports suggest the number of fake accounts may exceed three million and that Wells Fargo targeted seniors, immigrants, non-English speakers, and students for this fraud. Some of these fraudulent accounts harmed the credit of victims and incurred fees that were passed along to the victims. In the aftermath of the scandal, California State Treasurer John Chiang suspended business dealings with Wells Fargo as a sanction. The bank has had to pay over $185 million in regulatory fines for their illegal use of consumer information.
“Instead of allowing victims to have their day in court where an independent judge or jury can arrive at a verdict following an open and fair trial, Wells Fargo is pushing customers seeking justice into forced arbitration,” said Treasurer John Chiang in a recent statement. “While the bank’s latest marketing slogan is ‘On the side of customers,’ it continues to deny its victims their right to be made whole by coercing its customers into a secretive process that tilts in favor of corporations.”
Many of the victims attempted to sue the bank for damages and to recover their losses. However, Wells Fargo successfully argued that their customers waived their right to sue when they opened their original, legitimate accounts, which were the source of the personal information used to create the fraudulent accounts. The only recourse left to victims was through binding arbitration. Arbitration cases tend to favor the corporate defendant as they are able to select the arbitrator overseeing the case.
“Wells Fargo’s customers were ripped off twice,” said Richard Holober, Executive Director of Consumer Federation of California. “First, the bank created two million fraudulent accounts. Then when consumers tried to sue, the bank forced them into company-dominated arbitration hearings. SB 33 will guarantee that the victims of a bank’s identity theft will get their day in court.”
Dodd’s bill, SB 33, will prohibit the use of forced arbitration in cases where a financial institution has wrongfully used consumer information to commit fraud. Dodd’s bill has already gained support from the Consumer Federation of California, the Consumer Attorneys of California, and numerous consumer advocates. The bill now heads to the state Assembly, where it will be heard in the Assembly Judiciary Committee in June or July.
Thanks to Bill Dodd, with whom I frequently disagree amicably, for taking this on. Wells Fargo would have to have turned over a major leaf ( maybe a tree) to call itself “on the side of customers”. It remains to be seen if new policies will be redemptive.
I, too, applaud Senator Dodd for carrying this Bill. We too easily forget that the Constitution guarantees us the right to a jury a trial (7th Amendment). Instead we seem to focus only on our 1st and 2nd Amendment rights.
Also, those arbitration clauses are not just found in Wells Fargo documents. These clauses are in every consumer agreement we enter into – your phone company, your cable/satellite provider, health insurance, and car contracts. I urge you to contact any company that provides such a service to you and tell them that you “opt out” of the arbitration clause because you too could become the victim of fraud. By doing this the fraud can’t be hidden out of site and swept under the rug.
Wells Fargo sent this statement:
“Wells Fargo wants to make sure that no customer loses a single penny because of any potentially unauthorized accounts. We are making every attempt to resolve any issues directly with our customers. We also provide free mediation services to resolve disputes through an impartial third-party. If these efforts are unsuccessful, we turn to arbitration which provides an objective, legal forum through which customers’ disputes are heard and resolved quickly and fairly.
“We recently announced an agreement to settle a class-action lawsuit that will compensate customers who claim that Wells Fargo opened an account in their name without their consent. The settlement, which must be approved by the court, sets aside $142 million — this is in addition to $3.26 million which has already been refunded to customers. We are taking action to make things right.”
Ruben Pulido
Wells Fargo spokesman
Only financial fools have put their money/finances in B of A, Wells Fargo (IMHFO). I left BofA 45 years ago, and went to Wells… left them ~ 30 years ago… bad practices that far back… my free advice… go credit union… Yolo Federal, Golden One, Travis, others.
If you belong to a credit union, you own a piece of the ‘bank’… took me awhile, but convinced my kids to avoid banks (as in ‘plague’)… WaMu was an exception, but now they’ve been absorbed by Chase… USBank, like Chase are lesser evils (First Northern of Dixon is kinda a ‘cross’ between bank and CU), but still, credit unions are the best answer for almost everyone…
This is a Public Service Announcement. I am an unpaid spokesman.