Justice for Victims of Fraud Act of 2016

Summary: Justice for Victims of Fraud Act of 2016 This bill amends the Truth in Lending Act and the Electronic Fund Transfer Act to prohibit predispute arbitration agreements with consumers (i.e., agreements to arbitrate any future disputes between parties instead of pursuing the claims in court) from being valid or enforceable in disputes related to credit card accounts or personal bank accounts that are not subject to a final judgment by a court if the credit card or bank account was not issued in response to a request or application for that account.  The bill excludes from this prohibition accounts held by a financial institution pursuant to a bona fide trust agreement.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Justice for Victims of Fraud Act of 
2016''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) The Bureau of Consumer Financial Protection found that 
        Wells Fargo management implemented sales incentives, including 
        an incentive-compensation program, in part to increase the 
        number of banking products and services that its employees sold 
        to its customers.
            (2) The Bureau of Consumer Financial Protection found that 
        Wells Fargo employees engaged in improper sales practices to 
        satisfy sales goals under Wells Fargo's incentive compensation 
        program, including opening as many as 1,534,280 checking 
        accounts and 565,443 credit card accounts using consumers' 
        information without their knowledge or consent between May 2011 
        and July 2015.
            (3) Wells Fargo successfully claimed in Jabbari v. Wells 
        Fargo that customers had signed away their rights to hold Wells 
        Fargo accountable in court for claims of fraud because those 
        customers were bound to a forced arbitration clause for their 
        legitimate accounts.
            (4) After Wells Fargo publicly entered a settlement with 
        Federal regulators for the opening of thousands of unauthorized 
        customer accounts, Wells Fargo claimed in Mitchell et. al. v. 
        Wells Fargo et. al. that customers' fraud claims must continue 
        to be forced into arbitration.
            (5) Several courts have determined that despite claims of 
        fraud over unauthorized accounts opened without customer 
        knowledge or consent, those customers are still bound by 
        contracts forcing those claims into arbitration based on the 
        courts' interpretation of the Federal Arbitration Act.
            (6) The Federal Arbitration Act (now codified as chapter 1 
        of title 9, United States Code) was intended to apply to 
        disputes between commercial entities of generally similar 
        sophistication and bargaining power, but a series of decisions 
        by the Supreme Court of the United States have interpreted the 
        Federal Arbitration Act as applicable to claims of fraud.
            (7) Consumers have no meaningful choice whether to submit 
        their claims to arbitration and are typically unaware that they 
        have given up their rights to file claims in court.

SEC. 3. ARBITRATION OF CONSUMER DISPUTES RELATED TO CREDIT CARD 
              ACCOUNTS.

    Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is 
amended by adding at the end the following (and the table of contents 
for such chapter is conformed accordingly):
``Sec. 140B. Validity and enforceability
    ``(a) Definitions.--In this section--
            ``(1) the term `covered dispute' means a dispute that is 
        not subject to a final judgment by a court; and
            ``(2) the term `predispute arbitration agreement' means any 
        agreement between a person and a consumer providing for 
        arbitration of any future dispute between the parties.
    ``(b) Validity and Enforceability.--No predispute arbitration 
agreement shall be valid or enforceable in a covered dispute that is 
related to a credit card that was not issued in response to a request 
or application for that credit card account.
    ``(c) Applicability.--The applicability of this section to a 
predispute arbitration agreement shall be determined by a State or 
Federal court of competent jurisdiction.''.

SEC. 4. ARBITRATION OF CONSUMER DISPUTES RELATED TO COVERED ACCOUNTS.

    The Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) is 
amended by inserting after section 920 (15 U.S.C. 1693o-2) the 
following:

``SEC. 920A. VALIDITY AND ENFORCEABILITY.

    ``(a) Definitions.--In this section--
            ``(1) the term `covered account'--
                    ``(A) means a demand deposit, savings deposit, or 
                other asset account (other than an occasional or 
                incidental credit balance in an open end credit plan as 
                defined in section 103(i)), as described in regulations 
                of the Bureau, established primarily for personal, 
                family, or household purposes, including demand 
                accounts, time accounts, negotiable order of withdrawal 
                accounts, and share draft accounts; and
                    ``(B) does not include an account held by a 
                financial institution pursuant to a bona fide trust 
                agreement;
            ``(2) the term `covered dispute' means a dispute that is 
        not subject to a final judgment by a court; and
            ``(3) the term `predispute arbitration agreement' means any 
        agreement between a financial institution and a consumer 
        providing for arbitration of any future dispute between the 
        parties.
    ``(b) Validity and Enforceability.--No predispute arbitration 
agreement shall be valid or enforceable in a covered dispute that is 
related to a covered account that was not issued in response to a 
request or application for that covered account.
    ``(c) Applicability.--The applicability of this section to a 
predispute arbitration agreement shall be determined by a State or 
Federal court of competent jurisdiction.''.

SEC. 5. RULE OF CONSTRUCTION.

    Nothing in the amendments made by this Act shall be construed--
            (1) to authorize the imposition of a requirement to submit 
        a dispute to arbitration; or
            (2) to restrict any court from ruling that a requirement to 
        submit a dispute to arbitration is invalid or unenforceable.