Wells Fargo Identity Theft Racket Inspired SB 33 (Dodd): Justice for Victims
October 4 Update: Jerry Brown signed SB 33 into law.
The Consumer Federation of California is co-sponsoring legislation by State Senator Bill Dodd (D-Napa) inspired by Wells Fargo’s fraudulent creation of two million customer accounts. Senate Bill 33 will make sure that in the future, victims of banking fraud and identity theft are not forced to give up their right to bring a case for damages to court. High ranking Wells Fargo executives masterminded this criminal enterprise, which began as far back as 15 years ago.
SB 33 would void mandatory arbitration clauses in financial services contracts created surreptitiously through identity theft of customer information. While it cannot apply retroactively to Wells Fargo, the legislation would make sure that the next bank that unlawfully uses customer information for identity theft will not evade courtroom justice.
Wells Fargo’s criminal identity theft ring preyed on existing customers to open two million fraudulent accounts without the consumer’s knowledge. In 2015, Los Angeles City Attorney Mike Feuer and the federal Consumer Financial Protection Bureau bought charges against the bank for its massive fraud. It came to light that high ranking executives of the two trillion dollar Wells Fargo established, promoted and countenanced predatory new account requirements that led its employees to use their customers’ personal information to create more than two million fake accounts without the consumer’s knowledge.
Since news of this unprecedented bank fraud broke, Wells Fargo has spent a fortune on advertisements portraying a contrite bank sincerely devoted to its customers’ best interests. But when its victims sought justice, the bank hid behind legal fine print in fraudulent secret contracts to lock the doors to the courthouse. SB 33 will correct this outrage.
Some of these fraudulent accounts incurred charges and fees totaling millions of dollars that were passed along to the unknowing victims. When victims attempted to sue the bank for damages and to recover their losses, Wells Fargo convinced courts that language from the consumer’s initial legitimate account that deferred complaints to a private dispute resolution system called arbitration, also applied to future accounts that a consumer may open – including accounts the bank secretly created without the customer’s knowledge or consent. Under these bizarre court rulings, arbitrators hired by Wells Fargo get to decide whether victims can escape the clutches of the company-dominated private system of “justice” to get their day in court.
Introducing SB 33, Senator Bill Dodd stated, “it’s unacceptable for consumers to be blocked from our public courts to recover damages for fraud and identity theft. Allowing victims their day in court not only allows them to recover, it can prevent more victims by putting an end to illegal business practices. With quick federal action on this issue unlikely, it’s critical that California lead the nation to prevent these abuses.”
Arbitration is a private business-sponsored alternative to civil justice. An exhaustive study by the Consumer Financial Protection Bureau concluded arbitration is a stacked deck in favor of the corporation defending a claim by a consumer. In an arbitration proceeding, rules of evidence do not apply. Arbitrators are mindful of rewarding businesses that repeatedly pay their fees, as opposed to an individual consumer who is unlikely to appear before the arbitrator more than once.
Recently, an internal review by the federal Office of the Comptroller of the Currency concluded that this bank regulator turned a blind eye to as many as 700 separate instances of Wells Fargo account fraud brought to its attention as early as 2010. While the OCC has a long history as a captive industry lapdog, the independent CFPB went after Wells Fargo along with LA City Attorney Mike Feuer, imposed a substantial penalty and brought this criminal bank’s victimization of customers to a halt. The CFPB was established under the Dodd Frank Act in 2011. It is the only federal financial regulator dedicated to consumer protection. Legislation has been introduced in congress in 2017, with the blessings of the Trump Administration, to neuter the CFPB.
5/30/17 SB 33 passed the Senate 26-13.
5/2/17 SB 33 passed Senate Judiciary on a 5-2 party line vote. Senators Hannah-Beth Jackson, Henry Stern, Bob Wieckowski, Bob Hertzberg, and Bill Monning voted yes. Senators Joel Anderson and John Moorlach voted no.
- 6/20/17 CFC letter to Assembly Judiciary Committee
- CFC’s 4/26/17 Co-Sponsor Letter to Senate Judiciary Committee
- Bill Text
- Vote History
SB 33 Press Coverage
- “Legislation introduced to address Wells Fargo scandal” Daily Democrat, 5/3/17
- “Talks begin over bill inspired by Wells Fargo scandal” San Francisco Chronicle, 5/3/17
- “California bill seeks to help fraud victims of banks” KCRA Sacramento, 5/2/17
- Senator Bill Dodd, CA Treasurer John Chiang SB 33 Press Conference 5/2/17