As Wells Fargo Scandal Escalates, Senate Acts to Ensure Fraud Victims Have Their Day in CourtDecember 01,2016
Washington, DC— The American Association for Justice applauds today’s introduction of the “Justice for Victims of Fraud Act,” which will prohibit financial corporations from covering up certain illegal fraud schemes through the use of forced arbitration. The bills, introduced by Sen. Sherrod Brown (D-OH) and Rep. Brad Sherman (D-CA), will ban the use of forced arbitration in cases where the financial institution is accused of fraudulently opening accounts without customers’ knowledge.
“Few Wall Street practices are as abusive, unfair, and deceptive as the widespread use of forced arbitration,” AAJ President Julie Braman Kane said. “These clauses, which are hidden in millions of financial contracts, force consumers into a rigged, secretive system set up by powerful corporations to hide wrongdoing and evade accountability.”
The practice of using forced arbitration to cover up illegal fraudulent account schemes was recently brought to light by the ongoing Wells Fargo scandal. Since at least 2011, more than 5,300 Wells Fargo employees opened approximately 1.5 million accounts and applications for approximately 565,000 credit cards without the knowledge or consent of their customers. When these customers attempted to hold the bank publicly accountable in court, Wells Fargo systematically funneled the cases into a secret, binding forced arbitration forum where the dispute would be decided by a private company chosen by Wells Fargo. The secretive nature of forced arbitration allowed the bank to hide its wrongdoing from the public for years.
In addition to the “Justice for Victims of Fraud Act,” the Consumer Financial Protection Bureau is finalizing a rule to limit the use of forced arbitration in certain financial contracts, thus reinstating the rights of Americans who lost money and had their credit scores hurt by scams like the one perpetrated by Wells Fargo.
“The Wells Fargo scandal highlights the need for Wall Street accountability to be restored by ensuring that Americans can have their day in court,” Ms. Kane said. “AAJ strongly supports the “Justice for Victims of Fraud Act” and the CFPB’s proposal to restrict the use of forced arbitration, and we urge the Bureau to act quickly to restore the rights of American consumers.”