Wells Fargo asks U.S. court to dismiss account scandal lawsuit

By Suzanne Barlyn

NEW YORK (Reuters) - Wells Fargo & Co (WFC.N) has asked a U.S. court to order dozens of customers who are suing the bank over the opening of unauthorised accounts to resolve their disputes in private arbitrations instead of court, according to legal documents.

The motion, filed in the U.S. District Court in Utah on Wednesday, is in response to the first class action lawsuit filed against Wells since it agreed to pay $185 million (148.54 million pounds) in penalties and $5 million to customers for opening up to 2 million deposit and credit-card accounts in their names without their permission.

The scandal has shaken Wells, the third-largest U.S. bank by assets. Its former Chief Executive Officer John Stumpf stepped down amid the furore, it has been put under tougher regulatory scrutiny and its reputation has been damaged as it faces multiple probes.

The move to enforce the mandatory arbitration clauses comes as Wells Fargo has launched an advertising campaign to win back customer loyalty in the wake of the scandal.

A spokesman for Wells Fargo declined to comment on the filing.

In a written response to questions from U.S. lawmakers, published last week, the bank said it would stand by its arbitration policy but was offering free mediation services to affected customers.

Mandatory arbitration rules inserted into account-opening agreements prohibit customers from joining class actions or suing Wells Fargo. Instead, the agreements require individual, closed-door arbitration.

Mandating arbitration when signing up for financial products has become standard practise after a 2011 U.S. Supreme Court decision validated the practise. But customer advocates say it improperly denies customers the legal protections of court proceedings, such as the right to appeal, and helps to conceal corporate misconduct from the public and regulators because documents and hearings are not made public.

Customers trying to recover small sums of money are also unlikely to find lawyers to represent them in arbitration, critics say, and the cases do not set a legal precedent to help other affected individuals.

Last year, a court dismissed an earlier lawsuit against Wells Fargo, saying that customers had signed arbitration clauses when opening their accounts.

The bank has come under fire over its mandatory arbitration clauses from Democratic lawmakers in Congress, including Senator Elizabeth Warren of Massachusetts.

The Consumer Financial Protection Bureau, a brainchild of Warren, is considering rules to ban banks, credit card issuers and other companies from forcing customers to submit to arbitration and waive their right to join class action lawsuits.

But the CFPB could find its powers scaled back by President-elect Donald Trump and a Republican-led Congress, according to members of both political parties, lobbyists and lawyers.

(Editing by Carmel Crimmins and Lisa Shumaker)