An Update on the Wells Fargo Consumer Fraud Scandal

For the past several years, Wells Fargo has been at the center of controversy involving its customer accounts and deceptive employee sales practices. Wells Fargo pushed employee sales goals where its employees went as far as opening fake bank and credit card accounts leading to consumers being charged unnecessary fees and exposure to damage to their credit. Consumers and lawmakers have been seeking justice in what must be the highest profile consumer protection case in recent history. Just recently, a United States senator and a member of the House of Representatives introduced a bill intended to ensure that complainants will get their day in court.

So, how did this all begin? How did it reach the congressional level? What does the future hold? If this is the first you have heard of the matter or wish to be more informed, you have come to the right place.

Sales Goals

If you ask former Wells Fargo employees, they were the first victims of the scandal. Before customers even entered the picture, employees were thoroughly trained in cross-selling. For example, someone who has a question about a charge or fee on their account might be asked about setting up automatic payments. The real incentive though was to open new accounts. Both current and former employees of Wells Fargo have claimed that tremendous pressure was placed on them to open as many accounts as possible.

Fake Accounts

Consumers and attorneys have uncovered several deceptive practices, dating back as far as 2011:

1. Employees issued credit cards without consent.
2. Employees created fake e-mail accounts to sign customers up for online banking services.
3. Employees set up fake bank accounts, which then began accumulating fees.

These are the offenses. What do the numbers say? Approximately 1.5 million fraudulent accounts were opened. Applications were filed for 565,000 credit cards without consent and 5,300 employees were fired in connection to these matters. The bank has already agreed to refund $2.6 million in fees.  Because of these offenses, the Consumer Financial Protection Bureau, a government agency that monitors banks and lenders, issued Wells Fargo a $100 million dollar fine, the largest in its history.

Consumer Impact

Unfortunately, it was primarily customer impact that brought awareness of the problem in the first place. Customers began receiving credit cards they did not apply for. Others were forced to close accounts only after accumulating fees, which negatively affected credit scores. However, the issue of forced arbitration has become the federal government’s focus.

Forced Arbitration

Dozens of customers are now suing Wells Fargo in a class action lawsuit. In response, Wells Fargo has been putting all its might behind an effort to keep the whole affair out of court through arbitration clauses that were in customer agreements. These clauses were typically signed when the customers opened their accounts. However, the issue is that these accounts were opened without the full understanding of the consumers. To balance the equation, the federal government had to step in.

Justice for Victims of Fraud Act of 2016

Following written inquiries and official responses, legislation has finally been introduced by two Congressmen: United States Senator Sherrod Brown and United States Representative Brad Sherman.

Senator Brown has personally committed himself to holding Wells Fargo accountable for the damage it has done. He and fellow Senator Patrick Leahy wrote a letter to the bank asserting that by refusing to appear in court, the bank is prolonging the fraud and delaying any penalties it might face. On several occasions, Senator Brown has confronted the bank regarding its plans to restore damaged credit scores and otherwise repair harm done to its customers. Senator Brown is even extending his quest beyond the financial sector, targeting other businesses and organizations that use the arbitration clause.

If passed, the Justice for Victims of Fraud Act of 2016 will allow fraud victims to sue Wells Fargo in court despite having already signed contracts that included arbitration clauses. It will work in conjunction with a new rule from the Consumer Financial Protection Bureau, a proposal which aims to preserve the ability of consumers to band together in class actions when seeking relief through the civil justice system.

If you believe you have signed a contract with an arbitration clause or have questions regarding any consumer law matter, please contact this office for a free initial consultation.