West Virginia Record – Earlier this month, an editorial in The West Virginia Record described attempts to restore consumers’ right to hold criminal corporations accountable in court as nothing more than a money grab for trial lawyers. Read
I wonder if that includes Wells Fargo’s recent scandal – secretly opening more than two million fake accounts and using them to charge customers illegal fees. That corporate money grab is exactly the kind of scam consumers could fight back against with these new rules.
Forced arbitration pushes consumer claims out of court and into a secretive, rigged system where the corporation gets to pick who decides the case and which rules apply. Studies show companies win in arbitration 93 percent of the time – I suppose that is what the editorial meant when it called the practice “business-friendly.”
Perhaps worse, forced arbitration lets corporations keep misconduct out of public view and escape accountability. Case in point: Wells Fargo.
Customers have been trying to sue Wells Fargo over these fake accounts since at least 2013. But the bank used “ripoff clauses” in customers’ legitimate account contracts to block them from suing over fake accounts opened in their name – and then continued defrauding its customers for another three years.
If consumers had been able to sue individually or join a class action, this massive fraud could have been exposed long ago. And even now, Wells Fargo has said it will continue to block consumers from taking them to court.
A new rule proposed by the Consumer Financial Protection Bureau (CFPB) – the same one attacked in the editorial – would go a long way toward preventing another round of Wells Fargo abuses. It would restore consumers’ ability to join together to challenge big banks and lenders who break the law and return transparency to the arbitration process with new reporting requirements. Since May, more than 100,000 individual consumers and 281 consumer, civil rights, labor, and small business groups wrote in to support the proposed rule.
Sadly, Wells Fargo is not the only company that uses ripoff clauses to hide accusations of misconduct. Forced arbitration has become standard practice for big banks, payday lenders, for-profit colleges, and even nursing homes.
We should celebrate the fact that this new rule will put an end to this practice and restore our fundamental right to a day in court. It’s time we leveled the playing field by letting the CFPB do its job to protect us from lenders who are trying to increase profits with deceptive practices.