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Leslie+Goller+HeadshotWe’ve written exten­sively about forced arbitration clauses and how they are bad for consumers. That’s because they strip consumers of their right to pursue justice in a court of law when they are wrong­fully treated by a corpo­ration. They must seek justice through arbitration instead, which typically favors corpo­ra­tions.

Forced Arbitration

Now, two million consumers, harmed by fraud­ulent accounts created by Wells Fargo employees, may become the latest victims of forced arbitration clauses. The bank customers had unautho­rized credit card and bank accounts opened by Wells Fargo employees reportedly trying to meet sales quotas. Regulatory agencies slapped the bank with $185 million in fines for defrauding customers and Wells Fargo’s CEO has resigned.

According to U.S. Senate Banking Committee testimony last month, Wells Fargo is taking the position that the fraud victims cannot sue the bank in civil court, invoking the mandatory arbitration agreement customers signed in the contracts of their legit­imate Wells Fargo accounts before the fake accounts were created. This position was taken even though Wells Fargo had notice from its own employees that widespread fraud was occurring, including a successful whistle­blower action.

wells-fargoMandatory arbitration clauses are buried in the fine print of many contracts and agree­ments for needed things such as credit cards, cable service, internet service, and checking accounts — even doctor’s offices. They prevent consumers from pursuing justice in civil courts, including joining in class actions.

According to news reports, several members of Congress will propose legis­lation that would prevent Wells Fargo from invoking forced arbitration clauses in contracts with customers who are victims of the fraud­ulent accounts.

Possible Class Action?

In the meantime, three Utah residents filed a lawsuit in U.S. District Court in Utah earlier this month seeking class action status on behalf of others affected by the fraud­ulent accounts, according to ABC News. If class action status is granted, it will be a big victory for consumers and serve as a warning to big corpo­ra­tions that they cannot thwart consumers’ pursuit of civil justice by hiding behind mandatory arbitration.

Advocating for Consumers

We at Terrell Hogan are also working to help eliminate mandatory forced arbitration. We are members of the American Associ­ation for Justice, its Take Justice Back program and Public Justice, which support efforts to restore consumers’ rights.