Minnesota Attorney General Lori Swanson wants Wells Fargo to let customers sue the bank to resolve disputes over accounts opened without consumer authorization. That means Wells Fargo will have to forgo enforcing the mandatory arbitration clause included in its consumer contracts.
Earlier this month regulators fined Wells Fargo $185 million for opening checking and credit card accounts on behalf of customers who had no idea that was happening. Over a five-year period some 2 million credit cards and deposit accounts were opened that were not authorized by the bank’s customers.
While Wells Fargo has promised to make restitution, the bigger issue is how to compensate people whose credit scores were hurt by what the bank did. The conduct of Wells Fargo may have had a direct impact on someone’s credit score. Because of the accounts, customers may not have qualified for a mortgage or may have had to pay a higher interest rate because of what was reported on their credit report. Once something affects a consumer’s credit report and credit scores, it has the potential to have a lot of impact.
Many banks like Wells Fargo have mandatory arbitration clauses included in their customer agreements. Arbitration clauses require all disputes between a customer and a bank to be resolved through arbitration; customers lose their right to a day in court. Lori Swanson asked Wells Fargo to waive the required arbitration to allow customers their day in court to address the issue of damages.
The American Bankers Association claims arbitration is an efficient, fair and low-cost way to resolve disputes. Others argue arbitration is stacked in favor of the banks and other corporations. Some argue arbitration clauses allow institutions to avoid accountability and prevent customers from initiating or joining class action lawsuits.
Signing up for a credit card or opening a bank account can often mean signing away your right to take the company to court. Arbitration clauses are not only found with credit cards, they are commonly found in other consumer contracts including cell phone agreements.
This webpage contains general information and not legal advise. It is based on Minnesota law in effect at the time of writing. An attorney at Farrish Johnson Law Office, Chtd can advise you about how the law applies to your specific situation.