Despite claiming it’s ready to make amends to its customers after multiple scandals involving things like opening bank accounts and lines of credit for its customers without their notice or consent, overdraft fees, and fraudulent car loans, Wells Fargo’s CEO, Timothy Sloan, recently testified before the Senate Banking Committee to defend the bank’s use of arbitration agreements.
This is in spite of the fact that the bank has said it will not enforce its arbitration agreements with the class of consumers seeking compensation for the money lost and damage done to their credit ratings as a result of the false accounts the bank opened on their behalf. Without the option to file a class action lawsuit against the bank, each customer would have been forced into individual arbitration, the cost of which would likely have caused many to abandon the case if the costs of filing were more than their claims were worth.
Most cases never make it through arbitration because of the cost, the inability to file as a class or collective action, and the private nature of arbitration that prevents people from becoming aware of legal actions with claims similar to theirs. And yet banks and Big Business advocates continue to insist that arbitration benefits consumers more than class action or collective action lawsuits.
Sloan even cited a study conducted by the Consumer Financial Protection Bureau (CFPB) that Sloan claimed proved consumers received more redress from arbitration than collective actions or class actions.
In fact, Sloan was “cherry picking” data that fit with his argument and ignoring the CFPB’s larger ruling on the issue, which found that, while arbitration may provide a larger payout to individual plaintiffs, it barred the vast majority of cases due to the fact that the cost of filing for arbitration often outweighs the amount of the claim – a problem solved in the courts by class actions.
In a new ruling, the CFPB banned forced arbitration clauses that required consumers to waive their right to class actions.
But Congress has the opportunity to repeal regulations made by agencies such as the CFPB within 60 days. Back in July, as the CFPB was moving to finalize the rule, the House of Representatives passed a resolution to veto the bill. The Senate has until early November to vote to repeal the bill, which has the support of more than thirty Republicans.
In his opening statements, Sloan acknowledged the ways in which Wells Fargo had let down its consumers, but promised to do better, saying the bank was a better bank than it was a year ago and it will be a better bank next year than it is today.
But Senator Elizabeth Warren was skeptical, pointing out Sloan’s decades-long career with Wells Fargo as evidence that he might not be the best person to lead the bank through this change. Sloan was the chief operating officer when the news of the false accounts came to light, and he was promoted to CEO after Stumpf retired last year.
Warren claimed Sloan should have been fired, rather than promoted, saying he was at least incompetent, if not complicit in the bank’s mismanagement that resulted in the multiple class action lawsuits against the bank, totaling hundreds of millions of dollars. She also told him he should be fired.
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