In the wake of Wells Fargo’s most recent scandal, in which the financial firm was caught red-handed creating two million fraudulent accounts by customers, the bank promised it would clean up its act. It promised to change its practices and do its best to protect its customers. But as a New York Times‘ investigation shows, the bank has been – and still is – actively trying to kill off lawsuits stemming from its fraud by forcing customers affected to settle their claims via arbitration, rather than be allowed to have their day in court. So much for accountability.
Highlighting these actions are critical now that we have leaders intent on gutting the Consumer Financial Protection Bureau and its regulations – proposed and existing.
We should start by explaining first what forced arbitration is. It is part of a binding contract that bank consumers “agree” to by virtue of having an account, and it requires that all disputes arising with the firm must be handled with a private arbitrator, rather than in a court of law with a judge or jury. There is very good reason banks (and many other businesses) push so hard for these provisions, and its that the outcomes are most often favorable to defendants. Even where decisions are made in favor of consumers, they tend to be for far less than what they might have received in litigation. What’s more, the process is not transparent. It’s all confidential, so it does nothing to help others similarly situated. It effectively quashes the ability of wronged consumers to engage in a class action, which is sometimes the only way to truly hold these large firms accountable. Continue reading