Imagine a teenager who has been repeatedly caught sneaking out with their friends to get drunk and pilfer garden gnomes from the neighborhood. The teen’s parents ask “Why should we trust you anymore?” and the best answer the adolescent nincompoop can provide is, “Because I started cleaning my room and I’m gonna pass that Geometry quiz, I think.” Now, replace that teen with Wells Fargo, and you’ll basically have the scene from this morning’s Senate Banking Committee hearing.

At the hearing, Sen. Sherrod Brown of Ohio asked Wells Fargo CEO Tim Sloan directly if the bank has plans to rein in its use of forced arbitration, which prevents customers from filing lawsuits against Wells, even over accounts they never opened in the first place. Instead, wronged customers must go through individual, closed-door arbitration — a process that many Americans don’t even know exists until they try to sue their bank.

“For years, your bank used forced arbitration to hide cases where customers alleged fake accounts had been opened in their names,” said Brown. “Not only did you use forced arbitration to keep the fraud hidden — that’s what it did — but your bank’s also taken the position that the fine print on a real account should apply to a fraudulent one.”

Sen. Brown asked Sloan if Wells Fargo was willing to commit to ending its use of this practice. Not shockingly, Sloan’s answer was “No.”

But rather than launch into the normal litany of half-truths that the banking industry often uses to justify this practice, Sloan instead made the risible argument that Wells Fargo had improved so much in the last year that customers wouldn’t need to sue.

“When I hear the word arbitration, what I hear is the word ‘failing,’ and when we have to resort to — and have to have a conversation with our customers about — arbitration, it means that we don’t have the right product, we haven’t provided it in the right way, we haven’t responded to their complaint, and we haven’t made it right to them,” explained Sloan, who then went into detail about how Wells is reviewing all its products, improving its training, and aiming to resolve disputes immediately.

The problem is, the fake account scandal wasn’t about bad products, poor customer service, or dispute resolution. It was about Wells Fargo employees trying to make sales quotas by opening multiple, bogus accounts in the names of existing customers. That is an allegation of fraud, not shoddy service.

Sloan’s response came across like a fast food CEO responding to a food borne illness outbreak by saying “We’ve sped up the drive-thru and added Crystal Pepsi to the soda fountain!”

Brown was more polite, thanking the CEO for his “long and detailed answer,” before he got back to the main point of his line of questioning:

“You’re still going to use those forced arbitration to take advantage of your customers,” said the senator. “Why should we believe you’re committed to changing your bank’s practices and being fair to customers when you continue to use that behind-closed-doors arbitration system that clearly doesn’t allow customers their day in court?”

This time, Sloan was more explicit in his because-we-promise-to-not-do-it-again reply, saying, “The reason is because I think we’ve made fundamental changes so it will limit the number of times–” before Brown interjected, “I appreciate that, but give them their day in court so that those who you are not able to help or that you’re not able to satisfy?”

That’s when Sloan finally started regurgitating bank industry talking points about the “efficiency” of arbitration, and how the Consumer Financial Protection Bureau’s own study agreed that arbitration can be an expeditious way of resolve a customer’s legal dispute.

But Brown pointed out that this is a very slanted reading of the CFPB study, as this cherry-picked conclusion is about customers who have unique legal disputes with banks; not about the best or most efficient way to hold a bank accountable for a systemic failure to protect its customers from employee fraud.

Though Wells Fargo is attempting to settle some of the lawsuits arising from the ongoing fake account fiasco scandal, the bank continues to argue in court that it should not have to even face these class actions because of arbitration clauses included in customer contracts.

Attorneys representing Wells customers counter that the arbitration agreement only involves disputes over legal issues that could reasonably arise from the normal operation of a financial institution, and that the clauses should not protect a bank from having to answer from deliberate fraud allegedly committed by thousands of employees; bad behavior that bank executives have admitted to knowing about for years.

Last summer the CFPB finalized a new rule that would prevent many banks and other financial services from using forced arbitration to stop class actions. Banks could still compel arbitration in individual disputes, but they would be barred from using that contract clause to prevent customers from joining similar complaints into a single class complaint.

Bank-backed members of Congress are currently attempting to pass a resolution that would undo that rule. That resolution glided through the House on a nearly party-line vote in July, but has been sitting untouched by the Senate since, with some news sources reporting that there aren’t enough votes to pass it in the Senate. That resolution must be signed by the President by early November or the CFPB rule goes into effect.

That’s why the U.S. Chamber of Commerce, and several other bank-backed lobbying groups, recently filed an eleventh-hour lawsuit seeking to overturn the CFPB rule.

Here’s the full interaction between Brown and Sloan (assuming the embedded C-Span video player works; it’s notoriously unreliable):



Editor's Note: This article originally appeared on Consumerist.