What You Need to Know
- The bank will also update all consumer arb agreements to provide for reimbursement of filing fees where the customer prevails.
- PIABA says the bank should do away with mandatory arbitration altogether.
- CEO Charles Scharf also pointed to leadership changes at the bank.
Wells Fargo CEO Charles Scharf told senators Wednesday that the bank is in the process of removing “confidentiality restrictions in all types of customer arbitration agreements that have them, thereby increasing the transparency of the arbitration process.”
Scharf also told members of the Senate Banking Committee that Wells Fargo plans to update “all consumer arbitration agreements to provide for reimbursement of filing fees where the customer prevails” in order to ensure “the costs of filing for arbitration do not prevent consumers from bringing justified disputes to the bank’s attention.”
In a statement to ThinkAdvisor the same day, Wells Fargo said that “Wells Fargo Advisors follows the FINRA dispute resolution process rules, which already state that arbitrators may assess fees against either party even if Wells Fargo prevails.”
These changes, Scharf told the senators, follow Wells Fargo’s decision last year “to end the use of mandatory arbitration for future employee claims of sexual harassment. We are committed to maintaining a thoughtful approach to resolving disputes fairly and efficiently.”
PIABA Weighs In
David Meyer, president of the Public Investors Arbitration Bar Association, a group of lawyers that represent investors in disputes with the securities industry, told ThinkAdvisor Wednesday in an email that “removing the arcane confidentiality restrictions is appropriate and reflects basic decency but if WF truly was committed to resolving disputes fairly and efficiently, it would agree to permit its brokerage firms customers to choose between court and arbitration after a dispute arises and do away with pre-dispute forced arbitration altogether.”
Meyer added that the confidentiality restrictions referenced in Scharf’s testimony “relate to the employment arbitration agreements and, to a lesser extent, possibly the consumer agreements, but not to the brokerage accounts. There exists confidentiality concerns in the customer arbitration context but those issues arise post-filing and not based on the terms of the arbitration agreement.”
The Financial Industry Regulatory Authority’s arbitration forum, Meyer added, “is appropriate for many cases and it would continue to improve if it was a forum available as a choice rather than forced upon customers as the only available option to seek recovery for damages caused by the misconduct of financial advisors.”