Forced arbitration and Wells Fargo hurt Montanans

By: 
Katie Sutton
Montana Organizing Project

A new rule will soon curb the use of forced arbitration “rip-off clauses” by Wall Street banks and predatory lenders. The Consumer Financial Protection Bureau (CFPB) rule will prohibit the fine print of credit card, bank account, student loan, auto loan, payday loan, and other financial contracts from containing forced arbitration clauses with class action bans. The rule has widespread support, but bank lobbyists are pressuring Congress to block it.
Forced arbitration clauses take away your day in court when companies violate the law. Instead of a judge, a private arbitrator decides in a secretive proceeding with no appeal. When forced arbitration is combined with a class action ban, neither a court nor the arbitrator can hold a company accountable for widespread wrongdoing.  Justice is often completely denied, as few people can afford to fight small or complicated disputes by themselves.  
Wells Fargo, which has 37 branches in Montana, has repeatedly engaged in illegal conduct and aggressively uses forced arbitration. 
Fake accounts: Wells Fargo opened up 3.5 million fake accounts—including 8,352 in Montana —from 2002 to 2015 without customers’ consent. People tried to sue Wells Fargo in 2013, but the bank used forced arbitration to kick them out of court and block a class action, keeping the massive fraud out of the spotlight and allowing it to continue. Wells Fargo has continuously tried to use forced arbitration to block class actions over the fake accounts, even after being called out by members of Congress.  Public pressure is now forcing a settlement, but the damage is done.
Overdraft fees: Wells Fargo is trying to use forced arbitration to avoid justice for manipulating bank accounts to charge more overdraft fees.  A California judge found Wells Fargo’s practices “unfair and fraudulent” and ordered $203 million in refunds in California.  But Wells Fargo has repeatedly tried to block relief for consumers in the other 49 states -- including in Montana -- to avoid repaying up to $1 billion.  Wells Fargo’s overdraft fee revenue continues to increase, faster than that of any other large bank.
Disserving Our Military: Wells Fargo was fined millions for illegally foreclosing on servicemembers or repossessing their cars in violation of the Servicemembers Civil Relief Act.  The Department of Defense has opposed class waivers and forced arbitration clauses, which can block servicemembers’ access to the courts.
Class actions are critical to providing justice when millions of people are harmed; individual arbitration is no substitute. Since 2009, only 215 consumers nationwide have filed arbitrations against Wells Fargo, and not one has been filed in Montana. Arbitration can also be far too expensive for a single person with a small claim and cannot provide relief for everyone.
The CFPB’s forced arbitration rule holds corporate wrongdoers accountable by restoring consumers’ right to their day in court.

Katie Sutton
OrganizingMT@gmail.com
Montana Organizing Project

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