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Warren slams Wells Fargo over arbitration position

Published 11/28/2016, 10:43 PM
© Reuters. Senator Warren shows company documents to Wells Fargo CEO Stumpf at Senate Banking Committee hearing on firm's sales practices on Capitol Hill in Washington
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By Suzanne Barlyn

NEW YORK (Reuters) - Massachusetts Democratic Senator Elizabeth Warren on Monday criticized Wells Fargo & Co's (N:WFC) decision to require customers affected by its unauthorized accounts scandal to go through arbitration rather than allowing them to sue.

The San Francisco-based bank last week asked a U.S. court to uphold contract clauses that mandate arbitration, something financial firms often use to protect against litigation. Wells Fargo's situation is unusual, though, because it opened accounts without customers' permission, calling into question whether the contracts and their clauses are legitimate.

In a Facebook (NASDAQ:FB) post on Monday, Warren, a frequent critic of the banking industry, said Wells Fargo's promise to treat customers better in light of the scandal is "meaningless" as long as it is pursuing arbitration.

"After dozens of Wells Fargo customers sued the bank to recover fees they were charged from these fake accounts, Wells Fargo tried to boot the claims from court and into the closed-door, industry-friendly arbitration process," Warren said.

"Unfortunately, there's a real chance a court will let Wells Fargo shuffle these claims off to die in arbitration."

A Wells Fargo spokesman said the bank has an arbitration clause in its customer account agreements.

"In cases where customers have received a product that they did not want or authorize related to our recently-announced settlements, we are providing free mediation through an impartial third-party," the spokesman said.

Last year, The bank successfully argued in another lawsuit that arbitration agreements customers signed when opening legitimate accounts extended to the unauthorized ones.

Warren also used her Facebook post to advocate for a rule proposed by the Consumer Financial Protection Bureau that would eliminate mandatory arbitration.

© Reuters. Senator Warren shows company documents to Wells Fargo CEO Stumpf at Senate Banking Committee hearing on firm's sales practices on Capitol Hill in Washington

Before being elected to Congress, Warren was a vocal proponent of such an agency being created as part of the 2010 Dodd-Frank financial reform law. Some Republican lawmakers in newly powerful positions following the 2016 elections have pledged to eliminate it.

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