WASHINGTON, D.C. — Today, U.S. Sen. Sherrod Brown (D-OH) – ranking member of the Senate Committee on Banking, Housing and Urban Affairs – and U.S. Rep. Brad Sherman – a member of the House Financial Services Committee – introduced legislation that will give Wells Fargo customers who were victims of a fraudulent account scheme their day in court. Wells Fargo is using the forced arbitration clauses it tucked away in the fine print of contracts customers signed when they opened legitimate accounts to block them from suing over the fraudulent accounts. Brown has been leading the charge in the Senate to push Wells Fargo to stop the practice. But after refusing to answer Brown’s questioning at a Senate hearing in September, Wells Fargo CEO John Stumpf told the House Financial Services Committee that the bank will continue this practice, which Brown called ‘downright hostile’ to cheated customers.
“Forced arbitration is shielding Wells Fargo from being held accountable for tanking customers’ credit scores and charging them fraudulent fines,” said Brown. “Wells Fargo’s customers never intended to sign away their right to fight back against fraud and deceit. We need to give customers back their ability to seek justice in court so they can be made whole again.”
“I want to thank Senate Banking Committee Ranking Member Sherrod Brown for working with me to introduce the Justice for Victims of Fraud Act of 2016. This bill will give defrauded Wells Fargo customers the opportunity for their day in court,” said Sherman. “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.”
The Justice for Victims of Fraud Act of 2016 will work hand-in-hand with a new oversight rule that the Consumer Financial Protection Bureau (CFPB) put out in May to strengthen protections for consumers. Whereas the CFPB proposal would apply only to contracts signed after the rule is final – this bill would allow victims of Wells Fargo’s fraud to seek their day in court even if they signed contracts that included arbitration for their legitimate accounts in the past.
The bill is cosponsored by U.S. Sens. Patrick Leahy (D-VT), Patty Murray (D-WA), Richard Durbin (D-IL), Jack Reed (D-RI), Robert Menendez (D-NJ), Robert Casey (D-PA), Jon Tester (D-MT), Mark Warner (D-VA), Jeff Merkley (D-OR), Al Franken (D-MN), Richard Blumenthal (D-CT), Mazie Hirono (D-HI), Elizabeth Warren (D-MA), and Heidi Heitkamp (D-ND).
The bill has been endorsed by The American Association for Justice, Consumers Union, the National Association of Consumer Advocates, the National Consumer Law Center (on behalf of its low income clients), Americans for Financial Reform, the Center for Responsible Lending, the National Association for the Advancement of Colored People (NAACP), Media Voices for Children, Allied Progress, the Woodstock Institute, the Franciscan Action Network, the Economic Policy Institute Center, California Reinvestment Coalition, Consumers for Auto Reliability and Safety, National Consumers League, and Public Justice.
Brown has repeatedly pressed Wells Fargo for concrete answers over how the bank plans to make cheated customers whole, including plans to restore damaged credit scores. In a letter Brown led with U.S. Sen. Patrick Leahy (D-VT), he pointed out that forced arbitration clauses allowed Wells to force aggrieved customers into secret proceedings and prolong the fraud with impunity for far too long.
Brown has been working to oppose forced arbitration clauses beyond the financial sector as well. He successfully pressed the Department of Education to follow through with strict new oversight rules that would deny taxpayer funding to colleges that use forced arbitration, specifically for-profit institutions like the recently failed ITT Tech that often cheat students out of the education they deserve.