Wells Fargo Lawsuits Filed by Customers and Employees, Over Fraudulent Accounts

Wells Fargo regional executives fired employees when they refused to make “ghost” accounts to help hit sales goals, according to a lawsuit filed by former bank workers. 

Last week, a massive Wells Fargo Bank fraud was revealed, when it was announced that the bank will pay $185 million in fines, and return about $2 million in fees to customers who had fake accounts and credit cards set up in their names.

More than two million such ghost accounts and credit cards were made without the knowledge or permission of the customers, who were often then hit with fees and charges for accounts they did not know they had. The fraudulent Wells Fargo accounts were reportedly established in response to a bonus structure at the bank, which was encouraged by sales targets and compensation incentives based on new account activity.

There are now a growing number of Wells Fargo lawsuits being pursued by both former employees and customers over the practices. However, a group of employees first tried to bring the problem to light two years ago, in a 2014 lawsuit, according to the Los Angeles Times.

The LA Times reports that the lawsuit included charges of wrongful termination and failure to pay over time charges, as well as other labor law violations. Workers represented in the case say that Wells Fargo regional executives told them to open ghost accounts to meet sales targets, and those who refused were sometimes fired.

The charges came to the government’s attention in a lawsuit filed last year by Los Angeles City Attorney Mike Feuer.

Wells Fargo says it has fired 5,300 employees linked to the creation of the fake accounts, but has not said how far up the chain the firings go, or at what level in the bank’s chain of command the demand for the ghost accounts originated. The company has denied all of the employees claims.

Wells Fargo Customers Face Forced Arbitration

While the employees’ case is expected to go before a mediator sometime this year, and could potentially go to trial next year if a settlement is not reached, customers may face a harder time bringing their case in court.

One Wells Fargo class action lawsuit filed on behalf of some customers has made it through the court system, and is now in settlement talks, but details on the case and settlement have not been disclosed. However, the courthouse doors may be closed to most customers, since Wells Fargo includes forced arbitration clauses in all customer agreements, which require that any complaints go before a private arbiter.

Last month, the CFPB announced a proposed rule change, which seeks to limit forced arbitration clauses by financial institutions.

Consumer advocacy groups have expressed concern for years about forced arbitration clauses in financial contracts, nursing home admission contracts and other service contracts that place consumers in a position where they must take it or leave it. A growing number of groups have expressed support for the CFPB, with many urging that it be expanded to block all forms of forced arbitration.

Forced arbitration, also known as pre-dispute arbitration clauses, are commonly found in credit card agreements, loan paperwork, mobile wireless contracts, nursing home entrance agreements and other circumstances where consumers are placed in a position where they have no alternative but to waive their right to go to court in order to obtain services.

The result, critics say, is that individuals have to face powerful financial firms, and their considerable resources, on their own in arbitration that often appears to be skewed in favor of the financial industry, no matter how many clients claim to have been injured by the same problem or issue.

In a report released in March 2015, the CFPB found that tens of millions of Americans have entered into forced arbitration agreements, and most of them are not only unaware of how restrictive they are, but they are usually not even aware they have agreed to such a contract.

The report also found that most consumers who have signed arbitration clauses wrongly believe they can participate in class action lawsuits and are unaware of any opt-out opportunities.

The practice has been under attack on several fronts. In February, a group of U.S. Senators proposed legislation called the Restoring Statutory Rights Act (PDF), which would allow federal or state courts to revoke any arbitration agreement found to be “unconscionable, invalid because there was no meeting of the minds, or otherwise unenforceable as a matter of contract law or public policy.” It would also protect states from interference by federal laws when they choose to crack down and restrict forced arbitration clauses.