Wells Fargo's scandalous practice of secretly opening more than 2 million sham deposit and credit card accounts dragged on for at least five years.
How did Wells Fargo get away with it for so long?
A big part of the story: Wells Fargo contract provisions blocked consumers from suing the bank in court. It's past time to prohibit the "ripoff clauses" that prevent consumers from enforcing their most basic legal rights.
Like most big banks and many other corporations, Wells Fargo buries ripoff clauses in the fine print of its customer contracts. These provisions, also known as "forced arbitration" clauses, prevent consumers from suing over wrongdoing in court and prohibit consumers from banding together in class actions. Instead, ripoff clauses force consumers to seek redress in private arbitration, on an individual basis.
So when lots of consumers have suffered small harms — as was the case with Wells Fargo — there's nothing they can do. It's generally not worth the time and money to bring a case individually, and there's a disincentive to proceed in arbitration, where claims are decided by a private firm handpicked and paid by the corporation rather than a judge or jury. Effectively, banks and other corporations are free to rip off their consumers without fear of being held accountable in court.
The problem isn't just that aggrieved consumers don't have access to a remedy. Keeping cases out of court means abuses are kept out of the spotlight.
That's exactly what happened with Wells Fargo, and why the abuses could go on so long.
Indeed, more than three years ago, a Wells Fargo customer named David Douglas sued in California, contending that the bank's employees and branch managers "routinely use the account information, date of birth, and Social Security and taxpayer identification numbers ... and existing bank customers' money to open additional accounts." Douglas alleged that branch managers opened at least eight accounts in his name and created fake business accounts under his name without his knowledge.
This case should have gone to court but was blocked by a ripoff clause. Douglas's lawyers argued that an arbitration provision in a legitimate account agreement should not bar him from suing over a sham account he never agreed to open. However, citing recent 5-4 U.S. Supreme Court decisions, the judge held that the ripoff clause in the original agreement blocked him from suing Wells Fargo. . . .
"Even in fraud cases, Wells Fargo customers are locked into arbitration"
on the absurdity of forcing crime victims into arbitration with the wrongdoer, updated because of the latest revelations about the huge scale of Wells Fargo's racket.