Sen. Dodd Introduces Consumer Protection Bill in Response to Wells Fargo Scandal

Monday, December 5 2016

SACRAMENTO, CA – State Senator Bill Dodd (D-Napa) recently introduced new legislation to protect victims of mass fraud and identity theft. The introduction of this legislation comes following the recent Wells Fargo scandal where millions of accounts were fraudulently opened without consent, using consumer’s personal information from existing accounts. Dodd’s bill would help victims by eliminating the use of forced arbitration clauses in contracts that were fraudulently created. Such contracts prevent consumers from having their day in court to recover damages.

“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,” said Senator Bill Dodd. “With quick federal action on this issue unlikely, it’s critical that California lead the nation to prevent these abuses.”

Earlier this year, Wells Fargo Bank came under massive scrutiny when information came to light that employees had fraudulently used their customers’ personal information to create more than two million fake accounts without consent. Some of these fraudulent accounts incurred charges and fees totaling millions of dollars that were passed along to the unknowing victims. Many of the victims attempted to sue the Bank for damages and to recover their losses.

In response, Wells Fargo argued – and courts have upheld – that their customers had waived their right to sue when they previously opened their “legitimate” accounts with the Bank. As a result, the victim’s only available recourse was through binding arbitration. Arbitration is typically a less costly resolution process for the defendant. Outcomes from arbitration also tend to benefit the defending party as they are able to select the arbitrator who will oversee the case. Wells Fargo has since received upwards of $150 million in regulatory fines for their illegal use of consumer information.  

“Victims of fraud and identity theft can face many damaging and long lasting effects that can take years to be realized. The recent Wells Fargo case is a perfect example of that, and these victims deserve access to our public courts,” said Richard Holober, Executive Director of the Consumer Federation of California. “I’d like to thank Senator Dodd for introducing this legislation that takes a stand for consumer protection and will act as a deterrent against devious acts of fraud committed against the public.”

Dodd’s bill, SB 33, will prohibit the use of forced arbitration in cases where any organization has wrongfully used consumer information to commit fraud. Dodd’s bill has already gained support from the Consumer Federation of California, the Consumer Attorneys of California, and other consumer advocates. The bill will receive its first committee hearing early next year. 

Last week U.S. Senator Sherrod Brown (D-Ohio) and Representative Brad Sherman (D-Calif.) introduced a federal bill with a similar aim to give customers the ability to go to court to recover damages from fraudulently created accounts.