Originally published by Thomas J. Crane.
You have to love capitalism. I still believe the capitalistic system is the best around. But, the crazy things it can lead to. Everyone has heard about the Wells Fargo scandal. Bank tellers at Wells Fargo were required to open a certain amount of new accounts every month. The pressure was on to meet a certain goal every month. So, many Wells Fargo employees opened false accounts in the name of customers. They were so desperate to meet their goals, that they basically took money from customers to open accounts that the customers did not want.
Every bank customer at Wells Fargo signs an arbitration agreement when they open their account. Does that arbitration agreement apply to a fraudulent account? Yes, it does, according to early court opinions. Customers have tried to sue the bank for its fraudulent sales practices and have been stymied by the arbitration provision for the one true account. As one Los Angeles lawyer said, its “laughable to any logical person.” See Los Angeles Times report. In one instance, Wells Fargo opened eight accounts fraudulently in the name of one customer. But, a San Fransisco district court would not let him sue the bank.
Arbitration is often, paid-for justice. At least one study has shown that there is a “repeat player” effect. That is, an arbitrator will favor a repeat customer. In this context, Wells fargo would be the repeat player. They would have hundreds or more such arbitrations, while each customer likely has just the one. If there arbitrator wants more arbitrations, he knows he should find in favor of the repeat customer.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
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