Arbitration rules deny Wells Fargo consumers ‘day in court,’ CFPB says

Confronted with a little known clause to fend off lawsuits, an untold number of Wells Fargo customers in Arkansas and the U.S. are now faced with the possibility they will never be made whole financially following several violations that including setting up fake accounts.

Wells Fargo CEO Tim Sloan and other company executives have gone out of their way to make “we’re going to make things right” public apologies on Wall Street and social media platforms such as Twitter and LinkedIn.com, but some consumer advocate groups have criticized the financial conglomerate for saying one thing to customers and shareholders, but contradicting those same claims in pending federal lawsuits.

From Talk Business & Politics’ analysis of numerous news articles, dozens of state and federal lawsuits across the U.S., and similar grievances on other social media sites, many customers impacted by the scheme have also complained they have been forced to resolve their issues through the company’s now infamous customer service maze.

Others that have threatened lawsuits are now being told they will have to resolve the matter in private arbitration, although many don’t remember the small-print documents they signed or say the complex legal documents are often dozens of pages long. In talking with class-action attorneys with past or ongoing complaints against Wells Fargo, Talk Business & Politics found that many seeking to sue the banking giant have lost their homes, seen their cars repossessed, were forced to renew their credit card terms at a higher interest rate with lower spending limits, or had to close their bank accounts due to the bank’s other illegal business practices.

In other instances, less affluent Wells Fargo customers who can’t afford litigation face the long and often frustrating process of working with the bank and credit reporting agencies to have their credit scores and financial well-being restored, said one attorney for a West Coast law firm that is participating in the fake account class-action settlement.

To help those customers, the Consumer Financial Protection Bureau (CFPB) put in place a new rule this year to ban banks from using mandatory arbitration clauses to deny groups of people their day in court.

“Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong,” said Richard Cordray, director of the consumer watchdog agency created by the Obama Administration after the 2008 financial crisis. “These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”

Wells Fargo is facing several class action lawsuits over the arbitration rules where the bank allegedly changed the order of checking and debit card transactions that often caused those accounts to be overdrafted, thus triggering repeated fees and charges that were largely responsible for billions of dollars in profits the company posted in the post-recession era.

That case, in the 11th U.S. Circuit Court of Appeals in Atlanta, which includes Wells Fargo customers in Arkansas and 48 other states, was consolidated after a federal judge in Florida last year declined the bank’s request to force the claims into private negotiations. Three weeks ago, Wells Fargo appealed the arbitration ruling.

ARKANSAS AG OPPOSES CFPB LITIGATION
Arkansas Attorney General Leslie Rutledge, a frequent CFPB critic, supports the Trump Administration’s efforts to force the CFPB to withdraw its 377-page arbitration rule that would ban Wells Fargo and other companies from including mandatory arbitration clauses in consumer financial agreements and require those companies to reveal the details of those closed-door proceedings to the public.

Rutledge wrote a letter to White House Budget Director Mick Mulvaney urging him conduct a cost-benefit analysis of all recent and pending CFPB rules, including the ban on arbitration pacts within the consumer finance products and services market. In August 2016, after a private meeting with Cordray in Little Rock, the Arkansas AG wrote a direct letter to CFSB to withdraw the ban on the arbitration rules.

“The CFPB wants to insert itself into an area of the marketplace that has allowed consumers and companies to settle disputes at lower costs and at a faster pace,” Rutledge said. “As the chief consumer advocate for Arkansans, I do not want the government implementing a policy that will force citizens into more class action lawsuits and pad the wallets of trial lawyers.”

Asked by Talk Business & Politics if she would continue her efforts to kill the CFPB’s arbitration rule ban and seek charges against Wells Fargo if state insurance or banking regulators find the West Coast financial giant harmed Arkansas consumers, Rutledge spokesman Judd Deere offered the following statement:

“Attorney General Rutledge takes every report of Arkansans being harmed by a business seriously. She continues to monitor this situation and will evaluate options at the appropriate time as to how to proceed in the best interest of consumers,” Deere said.

Given the West Coast banking giant’s fresh disclosure about the fake account scandal, some class-action attorneys are asking the U.S. District Court for the Northern District of California to reopen the $142 million settlement case, Jabbari v Wells Fargo, that received preliminary approval from the federal court earlier this summer.

WELLS FARGO VIOLATIONS
Below are some of the major post-recession lawsuits and settlements that Wells Fargo has announced since the 2008 financial crisis.

• On July 12, 2012, the Department of Justice filed the second largest fair lending settlement in the department’s history to resolve allegations that Wells Fargo Bank, the largest home mortgage originator in the U.S., engaged in a pattern or practice of discrimination against qualified African-American and Hispanic borrowers in its mortgage lending from 2004 through 2009. The settlement provides $184.3 million in compensation to black and Hispanic borrowers that were steered into subprime mortgages or who paid higher fees and rates than white borrowers because of their race.

• On April 8 2016, the DOJ announced it had settled civil mortgage fraud claims against Wells Fargo, stemming from bank’s participation in the Federal Housing Administration (FHA) lending program. In the settlement, Wells Fargo agreed to pay $1.2 billion and admitted, acknowledged and accepted responsibility for certifying to the U.S. Housing and Urban Development (HUD) that certain residential home mortgage loans from May 2001 through December 2008 were eligible for FHA insurance when in fact they were not. Wells Fargo’s action’s resulted in the federal government having to pay FHA insurance claims when some of those loans defaulted.

• On Sept. 29 2016, after the fake accounts settlement was announced, Wells Fargo Dealers Services unit agreed to change its policies and pay more than $4.1 million to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA) by repossessing 413 cars owned by protected active military personnel without obtaining a court order. The DOJ’s investigation said it found “a pattern of unlawful repossessions” by Wells Fargo spanning more than seven years, and required the company to pay $10,000 to each of the affected service members, plus any lost equity in the vehicle with interest and repair the credit of all those affected.

• On Aug. 4, 2017, Wells Fargo agreed to settle a lawsuit that alleged some Veterans Administration refinanced mortgage loans originated by Wells Fargo should not have been eligible for VA guarantees. Under the agreement, Wells Fargo denies the allegations in the lawsuit but will pay $108 million to the U.S. government to resolve the claims.

• On Aug. 4, 2017, a federal lawsuit was filed alleging that Wells Fargo Merchant Services division overcharged Main Street businesses for processing credit card transactions. The “overbilling scheme” targeted less sophisticated and often minority-related businesses.
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Editor’s note: This is the final of three stories about alleged issues involving customer loans through Wells Fargo. Link here for the first report, and link here for the second report.