WASHINGTON – Democratic lawmakers introduced legislation Thursday that would prevent Wells Fargo from using arbitration agreements to settle claims made by victims of a fake-accounts scandal that came to light in September.
"Wells Fargo's customers never intended to sign away their right to fight back against fraud and deceit," said Sen. Sherrod Brown, D-Ohio, who introduced the legislation along with Rep. Brad Sherman, D-Calif.
"We need to give customers back their ability to seek justice in court so they can be made whole again," Brown said.
Wells has reportedly sought to use arbitration agreements that customers agreed to when creating real accounts to shield the bank from lawsuits over fake accounts that Wells employees created between 2011 and 2015 on behalf of unwitting customers in order to meet sales goals.
The bill being introduced by Brown and Sherman would be narrow in scope and would work in conjunction with a Consumer Financial Protection Bureau forced-arbitration rule that was proposed in May. The plan would limit the use of arbitration agreements that are often found in the fine print of financial contracts and prevent customers from filing class action lawsuits and require that disputes be handled by privately appointed individuals.
While the CFPB proposal is forward-looking, the Justice for Victims of Fraud Act of 2016 that Brown and Sherman have introduced would nullify the arbitration agreements that victims of the Wells scandal signed.
"If customers never authorized the opening of a phony credit card or checking account, there is no reason they should be bound by the arbitration agreement they were forced to sign when they set up their legitimate account," Sherman said.
A Wells spokesperson did not comment on the legislation directly but said the bank is taking steps to remediate customers who were victims of the fake accounts.
"If a customer received a product they did not want or authorize, Wells Fargo will make every attempt to first resolve the issue directly," the spokesperson said. "We are also providing free mediation services for the resolution of disputes, through an objective, third party."
Critics of the arbitration clauses say they tend to favor industry over consumers, but the spokesperson said, "The arbitration clause in the customer account agreements allows for a forum in which a customer has his or her dispute heard and resolved quickly and efficiently within a neutral, third-party legal process."