WASHINGTON, D.C. — U.S. Sen. Sherrod Brown (D-OH), Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs, announced plans today to introduce legislation when Congress returns that will prevent Wells Fargo from using so-called ‘forced arbitration’ clauses that were tucked away in the fine print of contracts customers signed when they opened legitimate accounts to block them from suing over fraudulent accounts that were created without their consent. 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 last week that the bank will continue this practice, which Brown called ‘downright hostile’ to cheated customers.
“Secret arbitration proceedings allowed Wells Fargo to get away with this fraud for far too long already. And even now that it’s out in the open, Wells Fargo still hasn’t given us straight answers as to how long this fraud went on, exactly how many customers were hurt, or how the bank will restore damaged credit scores that could end up costing customers thousands of dollars. Giving customers back their right to take Wells Fargo to court, gives them the power to ensure they are made whole and helps prevent cases like this in the future.”
The bill Brown is drafting 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 – Brown’s bill would allow existing Wells Fargo customers to seek their day in court even if they signed contracts that included arbitration for their legitimate accounts in the past.
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 Senator Patrick Leahy (D-VT), the Senator 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. Last week, he applauded a move by the Centers for Medicare and Medicaid Services to block forced arbitration clauses in contracts with long-term care facilities. Brown has also been pressing 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.