Over the years, many Wells Fargo customers have tried to sue the bank over fake accounts, but their cases have run into an increasingly familiar roadblock: arbitration clauses.
When customers sign up for accounts at Wells Fargo -- and at most other banks -- they sign contracts that oblige them to resolve disputes with the bank in private arbitration rather than in court. Wells Fargo has successfully argued that applies even in cases where customers have accused the bank of opening fake accounts in their names.
The argument goes something like this: Although a customer obviously didn't sign a contract when a fake account was created for them, agreements they signed when opening genuine accounts nevertheless require them to take all disputes with the bank to arbitration. Judges have generally agreed.
Today, Sen. Sherrod Brown (D-Ohio) asked Wells Fargo Chief Executive John Stumpf whether the bank will continue to take that stance.
“I’d have to talk to my legal team,” Stumpf said. “I’m not an expert in that.”
The growing scandal of fake accounts at Wells Fargo could help shore up support for pending rules that would limit the power of arbitration clauses in contracts from banks and other financial companies.
The Consumer Financial Protection Bureau, which has fined Wells Fargo $100 million for its creation of fake customer accounts, proposed rules last year that would ban the parts of arbitration agreements that prevent consumers from joining class-action lawsuits.
The CFPB and consumer advocates hold that class-action suits are useful in stamping out exactly the kind of behavior at the center of the Wells Fargo case: widespread practices that affect many consumers but that may cost any individual consumer only a small amount of money.