(CN) – Attorneys for Wells Fargo asked a three-judge, 11th Circuit panel on Thursday to toss multiple class actions accusing the banking giant of unfair overdraft practices and send the cases to arbitration.
Sonya Winner, of Covington & Burling LLP, who is representing the bank, told the panel that just because Wells Fargo didn’t enforce its arbitration rights in disputes with some customers, doesn’t mean it waived those rights altogether.
Class actions filed in 49 states accuse Wells Fargo of changing the order of debit card transactions — from the highest to lowest dollar amount — to unfairly increase the number of transactions subject to overdraft penalties.
Lawyers for the Wells Fargo customers say the practice, which went on for at least a decade, was “unconscionable” and disproportionately affected the poor because they are most likely to have low account balances.
The lawsuits claim that in addition to changing the order of transactions, Wells Fargo also failed to get customer consent before processing transactions, failed to give customers accurate balance information — increasing the chances of overdrafts, and refused to let them opt out of overdraft protection programs.
The cases were consolidated before a federal judge in Florida, who last year declined Wells Fargo’s request to force the claims into arbitration.
The bank appealed that ruling to the 11th Circuit, which heard the case Thursday morning.
The latest hearing actually represents the third time the case has come before the appeals court.
In 2012, the 11th Circuit ruled Wells Fargo missed its chance to compel the putative class of plaintiffs into arbitration after the bank decided not to move for binding arbitration on an individual plaintiff.
In 2015, the 11th Circuit vacated a judge’s ruling that the bank’s waiver of its right to arbitration with the named plaintiffs precludes it from compelling arbitration with the unnamed class members.
One Thursday, Winner argued the central question being presented is “whether or not arbitration can be waived.”
But U.S. Circuit Judge Bard Tjoflat cut her off.
“This is a classic case of issue preclusion,” the judge said. “It has never been decided that the contracts are valid to compel arbitration.”
Attorneys for the class argued that Wells Fargo waived its right to arbitration when it failed to raise the argument before the lawsuits were classified as class actions.
Tjoflat seemed to agree, noting “five years of litigation goes down the drain” if the bank is allowed to assert the arbitration clause now.
Still, the bank stands firm in its belief that arbitration is justified.
” Wells Fargo continues to believe that arbitration is a fair, efficient and effective way for a customer to pursue a legal claim and resolve a legal dispute,” Jason Menke, a spokesman for the bank told Courthouse News. “For many years, high-to-low posting order was standard in the banking industry. In 2010, Wells Fargo eliminated high-to-low posting order for debit card transactions and moved to chronological posting order for these items (the bank also moved to chronological posting order for checks and ACH transactions in 2014).”
Although the bank ceased its reordering practices in 2010, its business practices continue to be plagued with scandal. In 2016, it was revealed that Wells Fargo employees created millions of fake bank and credit card accounts in the names of real customers in order to fraudulently boost sales numbers.
The bank’s CEO, John Stumpf, resigned after the fraud was uncovered.
The news came just a few months after the US Supreme Court rejected the bank’s appeal arguing that a California overdraft class action verdict was unjustified and let a $203 million verdict in favor of the class stand.