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Will the Wells Fargo Scandal Make Forced Arbitration Illegal?

On Behalf of | Nov 29, 2016 | Personal Injury |

The Supreme Court is reportedly looking into the enforceability of class action waivers-also known as forced arbitration clauses-in employee contracts. These clauses prevent the people from taking their employers to court with a class action lawsuit, but a recent scandal might prove to be the undoing of this legal loophole.

Will the Wells Fargo Scandal Undo the Forced Arbitration Loophole?


Forced arbitration clauses are nothing new. You can find them in consumer contracts, nursing home admittance forms, and employment contracts all over the country. They prevent people from taking companies and employers to court by forcing individuals into arbitration, where it’s unclear if these individuals get fair consideration because arbitration records are often sealed from the public eye.

If this seems shady to you, you are not alone. Senators on Capitol Hill are slamming Wells Fargo for using forced arbitration in its consumer contracts. These clauses have allowed Wells Fargo to keep its fake account scandal out of the spotlight for years. It may have even prevented Wells Fargo employees from speaking out about the fraudulent accounts.

Senators are now demanding transparency from the bank after it was slammed with a $185 million fine. Wells Fargo’s CEO has stepped down, and former employees have come forward to say they were pushed to create fake accounts to meet sales goals. The public is demanding that the bank be held responsible for this fraud, but few actions have been taken as of yet. However, this very public scandal has put forced arbitration in the crosshairs.

A department of Health and Human Services is looking to ban class action waivers from admittance contracts used by nursing homes that accept federal money. Plus, the Supreme Court is being asked to intervene in a conflict between several circuit courts as to whether forced arbitration is enforceable in employment contracts. The Wells Fargo scandal could influence the opinions of the courts that examine these regulations, especially since many in Congress are already calling for a bill to protect consumers from forced arbitration.

Do you think the Wells Fargo scandal will end forced arbitration? Do you think forced arbitration is as big of a problem as some claim it is? Are there any solutions lawmakers aren’t thinking of? The Macon personal injury attorneys here at the McArthur Law Firm want to hear what you think. Head to our Facebook and Twitter walls to let your voice be heard, and keep reading our blog for news and updates.