Most everyone knows of Wells Fargo creating sham accounts for customers allowing their bank officers to get bonuses. The bank’s new CEO promised to correct these errors as his highest priority and to restore trust in Well Fargo. According to the New York Times today http://www.nytimes.com/2016/12/06/business/dealbook/wells-fargo-killing-sham-account-suits-by-using-arbitration.html?emc=eta1&_r=1%20-%20story-continues-1 , it is still business and profits over people at Wells Fargo.
While publicly stating it would correct its wrongs, Wells Fargo is filing motions in response to lawsuits by the ‘shammed’ customers demanding arbitration. Of course, lawyers representing these customers are fighting the motions claiming that Wells Fargo has gone too far in attempting to limit the bank’s accountability for its fraudulent activity. The bank does not want their dirty laundry aired where the public can see it in open court, but rather to use private arbitration where the odds favor corporations and businesses.
How did we get here? Wells Fargo employees used customers’ personal information to create unauthorized banking and credit card accounts. When this was discovered the impact was so severe that it forced the retirement of its CEO, John G. Stumpf, and caused an outrage with regulators, politicians and consumers. Now with the bank demanding arbitration the outrage is relit.
Arbitration agreements, like all contracts, must meet 4 elements to be enforced:
- Offer – One of the parties made a promise to do or refrain from doing some specified action in the future.
- Consideration – Something of value was promised in exchange for the specified action or non-action.
- Acceptance – The offer was accepted unambiguously. That is, the acceptance must mirror the terms of the offer.
- Mutuality – The contracting parties had “a meeting of the minds.” This means the parties understood and agreed to the basic substance and terms of the contract.
How could there be any one of these elements in a sham account? Wells Fargo contends that because the customer had an account open in which there was an arbitration agreement that they agreed to arbitration in all matters between the bank and the customer- apparently, even when the bank did something the customer never knew about, agreed to or even wanted. Some judges have ruled that Wells Fargo’s old agreements cover all matters between them and customers must go to arbitration over the fraudulent accounts.
I have written on arbitration agreements before and their inherent bias against consumers. Arbitration was originally designed for businesses to resolve their disputes. That is, where equal parties can agree to the four elements of an arbitration contract and have private, well paid professionals decide those disputes. It is not for consumers who have limited means- or who never even knew they entered into an arbitration agreement. There is practically no review of an arbitration decision. Once these business professionals rule after a private hearing, it is over. How we ever got to this point in our legal system is confounding. Consumers are not aware when they get a 14+ page document to sign when opening accounts or when clicking on an “I accept the terms” online, that they are waiving their 7th Amendment right to a jury trial. Couple that with an attitude of it will never happen to me, arbitration has become rampant.
According to the New York Times, Senator Sherrod Brown, an Ohio Democrat, introduced a bill last week that would prevent Wells from forcing arbitration in the sham account cases. I wish Congress would pass a bill to prevent arbitration in all consumer contracts. Wells Fargo’s misdeeds are a good example of why. The New York Times article also references a 2013 lawsuit claiming that several bank employees had forged a customer’s name and opened sham accounts to meet sales quotas. The actions described in this lawsuit are precisely the kinds of illegal acts the company acknowledged this year, when it paid $185 million to settle cases brought by federal regulators and the Los Angeles city attorney. That 2013 lawsuit never reached a courtroom because a judge granted Wells Fargo’s motion to arbitrate hiding it from public and regulatory scrutiny.
The Times article reveals other atrocities in the arbitration process. I encourage everyone to read it and if you get an opportunity, tell your political representatives to put an end to this injustice. Let business arbitrate disputes. Give the consumer his access to the courts.
Civil litigation attorney Billy Cunningham practice concentrates on personal injury, wrongful death, nursing home abuse, business litigation, environmental law and insurance matters. He is licensed to practice in the state and federal courts of Alabama and Mississippi, as well as in the U.S. Court of Military Appeals, U.S. Court of Appeals for the Fifth Circuit and the Supreme Court of the United States.