Wells Fargo

Wells Fargo is asking courts to dismiss lawsuits brought by customers for damages caused by fake accounts created by bank employees because of arbitration clauses signed by those customers when they opened bank accounts.

A typical arbitration clause contained in the fine print of bank account agreements looks like this:


Binding Arbitration. You and Wells Fargo Financial National Bank (the “Bank”), including the Bank’s assignees, agents, employees, officers, directors, shareholders, parent companies, subsidiaries, affiliates, predecessors and successors, agree that if a Dispute (as defined below) arises between you and the Bank, upon demand by either you or the Bank, the Dispute shall be resolved by the following arbitration process. However, the Bank shall not initiate an arbitration to collect a consumer debt, but reserves the right to arbitrate all other disputes with its consumer customers. A “Dispute” is any unresolved disagreement between you and the Bank. It includes any disagreement relating in any way to your Credit Card Account (“Account”) or related services. It includes claims based on broken promises or contracts, torts, or other wrongful actions. It also includes statutory, common law and equitable claims. A Dispute also includes any disagreements about the meaning or application of this Arbitration Agreement. This Arbitration Agreement shall survive the payment or closure of your Account. You understand and agree that you and the Bank are waiving the right to a jury trial or trial before a judge in a public court. As the sole exception to this Arbitration Agreement, you and the Bank retain the right to pursue in small claims court any Dispute that is within that court’s jurisdiction. If either you or the Bank fails to submit to binding arbitration following lawful demand, the party so failing bears all costs and expenses incurred by the other in compelling arbitration.

And the sad news is that some judges are actually going along with the bank and dismissing cases.


Okay, we get it.  Arbitration clauses serve a legitimate purpose of reducing the cost of litigation between banks and its customers.  We can envision that such a provision may help reduce the cost of solving routine issues such as how interest is computed or when late fees apply or other issues regarding the terms of the contract.

But to apply the arbitration clause to fraudulent or even criminal wrongdoing committed by the bank seems to go way beyond what a reasonably prudent customer would anticipate.  Sure, I may expect the arbitration to cover nerdy issues of interest and fees, but do you mean to tell me that customer that is physically assaulted by a bank employee has agreed to binding arbitration when they open up a lousy $10 savings account?  If a rogue group of Wells Fargo collection agents take my daughter hostage until the account is paid, have a agreed to arbitrate this wrongdoing?

My expectation of an arbitration clause is that its application is limited to accounts that I voluntarily open with the bank.  The notion that I have somehow given Wells Fargo the right to arbitrate the murder my family or to open fake accounts without my knowledge is absurd.  The terms of the arbitration agreement are far too vague to permit that interpretation, and even if the terms were clear such an agreement clearly violates public policy and should not be enforced.

Despite some success the bank has achieved in cases so far, I suspect that courts will be reluctant to allow such a vast application of the arbitration agreements going forward.

Wells Fargo still doesn’t get it.  I’m hoping the courts do.