Justice for Victims of Fraud Act of 2016

To amend the Truth in Lending Act and the Electronic Fund Transfer Act to provide justice to victims of fraud. 1. Short title This Act may be cited as the Justice for Victims of Fraud Act of 2016 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 (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. 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. 140B. Validity and enforceability (a) Definitions In this section— (1) the term covered dispute (2) the term predispute arbitration agreement (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. . 4. Arbitration of consumer disputes related to covered accounts The Electronic Fund Transfer Act ( 15 U.S.C. 1693 et seq. 15 U.S.C. 1693o–2 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 (3) the term predispute arbitration agreement (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. . 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.

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.