The Senate Banking Committee’s top Democrat said Tuesday that he has introduced legislation that would allow victims of Wells Fargo’s sales scandal to sue the bank rather than resolve disputes in private arbitration.
Ohio Sen. Sherrod Brown and Rep. Brad Sherman, a California Democrat, filed the bill after a version submitted in December did not see action during the previous Congress. The legislation seeks to override clauses folded into contracts that bar customers from suing the San Francisco-based bank in class-action cases.
In September, regulators fined Wells $185 million to settle allegations that its employees opened as many as two million fake accounts in order to meet high-pressure sales goals. The bank has acknowledged the phony accounts may have spurred charges for customers or hurt their credit ratings.
Critics say Wells Fargo has sought to push disputes over its fake accounts into binding arbitration instead of having them heard in court. That move that has further stoked outrage against the bank.
“Wells Fargo is using the forced arbitration clauses it tucked away in the fine print of contracts customers signed when they opened legitimate accounts to block them from suing over the fraudulent accounts,” a press release from Brown’s office says. The bill would give customers affected by fake accounts “their day in court.”
Under Wells Fargo’s account terms, customers waive their right to a jury trial or a trial before a judge in public court. The arbitration agreement still allows a customer to take a dispute to small claims court.
Wells Fargo spokeswoman Jennifer Dunn would not comment on the legislation.
In a statement, she said if a customer received an unwanted product due to improper sales practices, Wells is “making every attempt to resolve the issue directly with them first.” She also noted that Wells continues to provide free mediation services through an impartial third-party.
“As a last resort, the arbitration clause in our account agreements allows a customer to engage another neutral party to have his or her legal dispute heard and resolved quickly and efficiently,” she said. “We believe that these steps are in the best interest of our customers and provide numerous opportunities for them to be made whole.”
Supporters of forced arbitration say the practice can be faster and less expensive than class-action suits. Critics argue arbitration tends to favor corporations over individuals.