Minnesota’s attorney general on Tuesday weighed in on the Wells Fargo scandal, demanding that the bank end the practice of forcing customers into binding arbitration when they have a dispute with the company.
The bank, which has come under fire after admitting it may have opened at least 2 million accounts for customers without their knowledge, requires people to waive the right to a jury trial if they have any dispute over their accounts.
“Wells Fargo has aggressively enforced these provisions against customers who alleged that the bank opened unauthorized accounts under their names,” Lori Swanson, Minnesota’s attorney general, wrote in a letter to Wells Fargo CEO John Stumpf on Tuesday.
In at least two cases, the bank has argued that the arbitration clauses attached to customers’ legitimate accounts should force arbitration of any claims about their unauthorized accounts, Swanson said, calling the practice “absurd and unfair.” Judges have sided with Wells Fargo in the two cases noted by Swanson.
But allowing disputes such as those over unauthorized accounts at Wells Fargo to go to court brings transparency and encourages good corporate behavior, Swanson said.
“The specter of a lawsuit tends to bring about reforms,” she said. “You wonder here whether the ability to bring lawsuits earlier could have brought this issue to a head.”
A spokesman for Wells Fargo, the largest bank by deposits in Minnesota, said in a statement that "if any customer has a product or service they don't want or need, we are working to make things right."
In cases where customers have unauthorized accounts, the bank is "providing free mediation through an impartial third-party."
While the bank’s settlement with the Consumer Financial Protection Bureau admitted only that 2.1 million accounts “may not have been authorized,” the true extent of the fraud is unknown.
A spokeswoman for the bank declined on Tuesday to say whether Wells knows how many accounts were opened without customer knowledge, or whether the bank is trying to find out.
Stumpf told a congressional panel last week that the bank’s use of arbitration clauses is a “fair way” to pay customers for financial damages.
With her letter, Swanson joined other politicians around the country who have criticized the bank’s use of arbitration.
On Monday, Sen. Sherrod Brown of Ohio introduced legislation in Congress to prevent Wells Fargo from invoking arbitration in contracts with customers.
Democratic presidential candidate Hillary Clinton also criticized the practice during a speech on Monday.