Wells Fargo admits that its employees opened more than 2,000,000 fake accounts in order to run up fraudulent charges against its customers (employees who balked at committing fraud were fired and blacklisted for life from the banking industry); it also says that the customers it stole from can’t sue the company because fake account paperwork bearing their forged signatures includes a promise to enter into binding arbitration rather than suing.
Binding arbitration is a system created to allow giant companies to settle their differences without costly litigation, but a Supreme Court decision has allowed it to be applied to the dealings between individuals and giant companies — leading to a plague of companies that make you surrender your constitutional legal rights as a condition of shopping with them (it took me six months to find LA doctors and dentists who’d see me without signing one of these agreements!).
Notably, binding arbitration clauses kill class action lawsuits, which are critical in this kind of mass fraud. Alas, Wells Fargo had good luck convincing judges that they couldn’t be subjected to class actions, even after admitting massive, criminal frauds. Prior to the 2016 election, there was some hope that federal finance regulators would crack down on them, but since Donald Trump owes Wells Fargo more than $500,000,000, that seems unlikely (indeed, one of Trump’s first acts after his inauguration was to flush the Department of Labor’s whistleblower site for Wells Fargo employees down the memory hole.
Wells Fargo told Consumerist that forcing its customers to seek justice one at a time, through the arbitration system’s kangaroo courts, was good for them: “Our goal is to do what’s right for every customer and team member, every day. If we are unable to resolve a dispute directly, arbitration is a forum in which a customer or a team member dispute is heard and resolved within a neutral third-party legal process. Arbitration is generally faster and less expensive than litigation. It is a fair, efficient and effective forum available for a customer and a team member to pursue and resolve a legal claim.”
As Consumerist points out, courtrooms are also forums “in which a customer dispute is ‘heard and resolved within a neutral third-party legal process.” And while arbitration might be faster than courts for settling a single claim, 2,000,000 arbitration proceedings are going to be a lot slower than one class action suit.
In a follow-up question, we asked Wells how it could claim that arbitration is more efficient, unless the bank is indeed hoping that only a small number of customers will enter into this process. The response was even more baffling.
“By resolving legal disputes through arbitration, both the consumer and the business have the ability to reach a positive resolution at a lower cost,” explained the bank.
Once again, this doesn’t seem to compute.
With the exception of the very few (sometimes only one) named plaintiff in a class action, the members of the plaintiff class don’t have to do anything to mount a case. That’s the point: The named plaintiff represents the class.
Requiring that customers enter into arbitration on an individual basis means that Wells is asking each affected person to put in the time, effort, and expense of bringing a case against a bank with nearly $2 trillion in assets.
Rosemary Shahan, President of the Consumers for Auto Reliability and Safety Foundation, and a member of the We Do Count coalition tells Consumerist that Wells Fargo’s justification for forcing arbitration reminded her of the old line “‘Welcome to my parlor,’ said the spider to the fly.”
Wells Fargo Tries, Fails To Explain Why Customers Shouldn’t Be Allowed To Sue Over Fake Accounts [Chris Morran/The Consumerist]