New CFPB rule would ban clauses that keep these cases out of court unless Congress vetoes it
ATLANTA- On Thursday, a federal appeals court in Atlanta will hear arguments in Wells Fargo’s ongoing quest to stop consumers in 49 states, including Georgia, from banding together in a class action to challenge overdraft fee practices that a California court already concluded were “unfair and fraudulent.”
“Wells Fargo opened more than 55,000 unauthorized accounts in Georgia and harmed even more Georgians with their unfair and deceptive overdraft practices, including reordering the timing of purchases to maximize overdraft fees,” said Liz Coyle, Executive Director of Georgia Watch. “Now this big bank wants to keep the people they harmed from seeking justice through the courts, instead forcing consumers into an arbitration process that is stacked against them.”
The case before the Eleventh Circuit Court of Appeals in Atlanta, Gutierrez v. Wells Fargo, challenges Wells Fargo’s manipulation of the order of bank account debits to enable the bank to charge more overdraft fees by adding fees on purchases made before an account became overdrawn. In a separate case, Wells Fargo paid $203 million to a class of California consumers after the court concluded, after a trial, that Wells Fargo deceived customers and sought to maximize the number of overdrafts. The present case is for consumers in the other 49 states. Other banks have engaged in similar conduct, but Wells Fargo is the only large bank that has not settled the charges.
The hearing Thursday is Wells Fargo’s appeal of a ruling that the bank could not block the class action and force the named plaintiffs to arbitrate their cases individually before a private arbitrator, who would have no authority to order relief for Georgians and the millions of other people harmed. Wells Fargo claims that forced arbitration clauses in the fine print of bank account contracts deprived customers of their right to go to court. The district court has twice concluded that Wells Fargo waived the ability to force arbitration by litigating in court for years and only belatedly moving to compel arbitration.
“Just as with the 3.5 million fake accounts Wells Fargo created, millions of people have been harmed by Wells Fargo’s fraudulent and deceptive efforts to increase overdraft fees. Forced arbitration clauses that require people to arbitrate one by one are a get-out-of-jail-free card for bad actors,” said David Seligman, contributing author at the National Consumer Law Center.
Only 215 people in the entire country, and just eight in Georgia, have filed arbitrations against Wells Fargo since 2009 for any reason, despite a litany of wrongdoing by the bank including the fake account scandal, fraudulent overdraft fees, charges for unwanted and unneeded auto insurance, hidden fees for military veterans who refinanced their mortgages, and violations of the Servicemembers Civil Relief Act.
A new rule by the Consumer Financial Protection Bureau would prohibit bank account and other financial contracts from having forced arbitration clauses with class action bans. But the U.S. House of Representatives voted to block the rule in July and the U.S. Senate may vote in September.
Founded in 2002, Georgia Watch is a statewide nonprofit organization working to protect and empower Georgia consumers on matters that impact their quality of life, particularly focused on those most affected by predatory business practices, the high cost of utilities and healthcare, and restricted access to the civil justice system.
Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.