Wells Fargo tries to push 80 client lawsuits into arbitration
(Bloomberg) -- Wells Fargo is trying to keep dozens of customers suing over bogus accounts opened by its employees out of court, saying they agreed to resolve any disputes in arbitration when they began doing business with the bank.
The lender also asked for the lawsuits filed by 80 customers in federal court in Salt Lake City to be thrown out. Wells Fargo noted in a Nov. 23 filing that a separate judge has already ruled that arbitration agreements can be enforced in a similar class-action lawsuit in Northern California.
The San Francisco-based bank has faced a torrent of criticism and the ire of regulators after agreeing to pay $185 million in September to settle claims that employees opened potentially more than 2 million unauthorized accounts. It fired 5,300 workers over five years. John Stumpf resigned as chairman and chief executive officer in the wake of the scandal. Carrie Tolstedt, the executive in charge of the community banking unit, retired this year.
Three Utah customers sued in September shortly after the settlement was announced and blamed the scandal on the lender’s push to increase the number of accounts held by clients -- a strategy called cross-selling designed to boost the number of accounts on which the bank could collect fees. Wells Fargo vowed to eliminate sales goals linked by regulators to cross-selling.
The plaintiffs in the Utah lawsuit seek to represent other customers in a class action and to recover at least $5 million in damages from the bank. They said the company also should have to pay punitive damages for its failure to alert customers to the abuses for more than a year after it was sued by the Los Angeles city attorney.
The SEC, the Department of Justice, state attorneys general and prosecutors’ offices and congressional committees have started inquiries into the sales practices.
Congressional representatives lambasted Wells Fargo in September over concerns that the bank’s check of a customer’s credit history, when an unauthorized credit-card account was opened, could have hurt their credit scores. That might have resulted in customers paying higher interest rates when they sought credit at other institutions.
The lender eliminated production goals in effort to reassure regulators, lawmakers and customers after employees opened more than 2 million accounts without clients’ approval.
The bank can adapt to adjustments needed to deal with claims it opened 2 million customer accounts without authorization, according to CFO John Shrewsberry.
Client claimed that adviser's recommended strategy earned fees and commissions for the bank but wrecked his inheritance from his great grandfather.
Tim Sloan, who replaced Stumpf as CEO, promised to "make it right." He said in October that the bank’s "intent is to err on the side of the customer." It would refund customers with damaged credit scores who got Wells Fargo loans, he said.
The lender has had a harder time courting new customers for some parts of its retail-banking business. New credit-card applications dropped by half to 200,000 in October. Customers opened 44% fewer new checking accounts, Wells Fargo said.
The bank launched a national advertising campaign last month that attempted to show what actions it’s taking to ameliorate the wrongdoing that was found.