On Wednesday, California Governor Jerry Brown signed a bill by Senator Bill Dodd (D-Napa) to protect victims of mass fraud and identity theft. The bill was introduced in response to the Wells Fargo scandal where millions of accounts were fraudulently opened without consent, using personal consumers information from existing accounts. This new law eliminates the use of forced arbitration clauses in contracts that were fraudulently created by financial institutions, giving victims their day in court.
“At a time when some in D.C. want to rollback consumer protections, California is leading the way and setting a national example,” said Senator Dodd. “Governor Brown’s signature demonstrates that California won’t sit back while our citizens get ripped off. I sincerely hope other states follow suit. Ensuring victims have access to our public courts helps them recover and can stop illegal business practices. The idea that consumers can be blocked from our public courts when their bank commits fraud and identity theft against them is simply un-American.”
Late last year, it was discovered that Wells Fargo Bank employees had fraudulently used their customers’ personal information to create over two million fake accounts without consent over the course of five years. Some of these fraudulent accounts incurred fees that were then passed along to the victims. Last week, Wells Fargo admitted the actual number of victims may eclipse 3.5 million, nearly 70 percent more victims than previously reported.
“Had my bill been in place before the scandal, Wells Fargo would have been held publicly accountable years ago and there would be less victims today,” said Dodd.
Many of the victims attempted to sue the bank for damages and to recover their losses. Wells Fargo argued, with the backing of the courts, that their customers waived their right to sue when they opened their “legitimate” accounts with the Bank. The only recourse left to victims was through binding arbitration. Arbitration cases usually tend to favor the defendant, as they are able to select the arbitrator overseeing the case. In the aftermath of the scandal, California State Treasurer John Chiang suspended ties between Wells Fargo and the state of California, and the Bank has had to pay $185 million in regulatory fines for their illegal uses of consumer information.
“Wells Fargo opened phony accounts for 3.5 million customers and then rubbed salt in the wounds of its victims by wrongly forcing them into arbitration,” said State Treasurer John Chiang. “Today, California has leveled the playing field and restored an urgently needed measure of fairness by giving victims the opportunity to plead their cases before judges and juries. Banks like Wells Fargo that commit fraud will no longer be able to deny customers the right to be made whole by coercing them into a secretive process that tilts in favor of corporations. I applaud Governor Brown for signing this important pro-consumer legislation and for the leadership and support of Senator Dodd, the Consumer Attorneys and the Consumer Federation of California.”
Dodd’s bill, SB 33, will prohibit the use of forced arbitration in cases where a financial institution has wrongfully used consumer information to commit fraud. The measure was sponsored by Treasurer John Chiang and leading consumer advocacy groups. The new law takes effect in January. Similar legislation has been introduced in the United States Congress by U.S. Senator Sherrod Brown (D-Ohio) and Representative Brad Sherman (D-Calif.), but those measures have yet to be granted a hearing in the Republican controlled Congress.
Senator Bill Dodd represents the 3rd Senate District, which includes all or portions of Napa, Sonoma, Solano, Yolo, Sacramento, and Contra Costa Counties. You can learn more about Senator Dodd at www.sen.ca.gov/dodd.