California considers law sparked by Wells Fargo's scandals
September 6, 2017
• Would eliminate use of forced arbitration clauses in some contracts
• “Allowing victims to access our public courts helps them recover”
The California State Legislature has approved a bill by Sen. Bill Dodd, D-Napa, that he says will protect victims of mass fraud and identity theft.
The bill was introduced in response to the Wells Fargo scandal where millions of accounts were fraudulently opened without consent, using consumer’s personal information from existing accounts.
This legislation would eliminate the use of forced arbitration clauses in contracts that were fraudulently created by financial institutions, giving victims their day in court.
“Allowing victims to access our public courts helps them recover and can prevent more victims by putting an end to illegal business practices,” says Mr. Dodd. “The idea that consumers can be blocked from our public courts when their bank commits fraud and identity theft against them is simply un-American.”
He says had his bill been in place before the scandal, Wells Fargo would have been held publicly accountable years earlier and the fraud could have been prevented from spreading.
Late last year, it was discovered that Wells Fargo Bank employees had fraudulently used their customers’ personal information to create over two million fake accounts without consent over the course of five years. Some of these fraudulent accounts incurred fees that were then passed along to the victims. Last week, Wells Fargo admitted the actual number of victims may eclipse 3.5 million, nearly 70 percent more victims than previously reported.
“Instead of allowing victims to have their day in court, where an independent judge or jury can arrive at a verdict following an open and fair trial, Wells Fargo wrongly pushed customers seeking justice into forced arbitration,” says California State Treasurer John Chiang, explaining the need for the legislation.
In the aftermath of the scandal, Mr. Chiang suspended ties between Wells Fargo and the state of California, and the bank has had to pay $185 million in regulatory fines for their illegal uses of consumer information.
Mr. Dodd’s bill, SB 33, will prohibit the use of forced arbitration in cases where a financial institution has wrongfully used consumer information to commit fraud. The bill now heads to Gov. Edmund Gerald Brown Jr., who has just over a month to sign or veto the bill.