Napa Lawmaker's Bill To Protect Fraud, ID Theft Victims Clears Senate Committee

NAPA, CA -- A bill by Sen. Bill Dodd (D-Napa) to protect victims of mass fraud and identity theft has cleared a key vote in the Senate Judiciary Committee.

Dodd’s bill, which was introduced last December, moved through the committee on May 2. It was drafted in response to the recent Wells Fargo scandal where millions of accounts were fraudulently opened without consent, using consumer’s personal information from existing accounts.

The legislation, co-sponsored by California State Treasurer John Chiang, would give victims their day in court by preventing financial institutions from using forced arbitration clauses in cases where they perpetrated fraud.

“The idea that consumers can be blocked from our public courts when their bank commits fraud and identity theft against them is un-American,” Dodd said. “Allowing victims their day in court helps them recover and can prevent more victims by putting an end to illegal business practices. If SB 33 was already law, Wells Fargo would have been publicly held to account years ago, and the fraud could have been prevented from spreading.”

Late last year, it came to light that Wells Fargo Bank employees had fraudulently used their customers’ personal information to create over two million fake accounts without consent over the course of five years. Some of these fraudulent accounts harmed the credit of victims and incurred fees that were passed along to the victims.

In the aftermath of the scandal, California State Treasurer John Chiang suspended business dealings with Wells Fargo as a sanction. The bank has had to pay over $185 million in regulatory fines for their illegal use of consumer information.

Many of the victims attempted to sue the bank for damages and to recover their losses. However, Wells Fargo successfully argued that their customers waived their right to sue when they opened their original, legitimate accounts, which were the source of the personal information used to create the fraudulent accounts. The only recourse left to victims was through binding arbitration.

Dodd’s legislation, Senate Bill 33, would prohibit the use of forced arbitration in cases where a financial institution has wrongfully used consumer information to commit fraud. The bill has already gained support from the Consumer Federation of California, the Consumer Attorneys of California, and numerous consumer advocates.

SB 33 is currently being deliberated by the Legislature.

Image via Sen. Bill Dodd