Californians will soon be able to legally sue their banks
Inside Subprime: September 7, 2017
By Caroline Thompson
As we reported back in July, a rule issued by the Consumer Financial Protection Bureau, which would have stopped banks from being able to hide arbitration clauses in the fine print of their contracts, was struck down by the Republican-majority House just weeks before it would have gone into effect. The rule was designed to allow consumers who had been wronged by major companies to band together and sue, a practice which most U.S. banks block in their contracts. This forces individuals to go up against big banks on their own – a difficult task for someone without the seemingly endless resources of the banking industry.
While the House’s strike-down of this rule was a loss for national consumers (although the Senate could pass it), residents of the coastal state of California will still be able to reap similar rights under a new bill passed by the California state legislature – expected to be shortly signed into law by Governor Jerry Brown.
The California law was inspired by the many Wells Fargo scandals that rocked the banking world over the past year. According to a piece on Reuters:
“Clauses inserted into Wells Fargo account-opening agreements have blocked customers from taking the third-largest U.S. bank to court over last year’s disclosures that it opened millions of accounts without customer knowledge.”
Wells Fargo has been forced to issue $6.1 million in customer refunds for the fake accounts scandal alone, but customers affected by this and the bank’s other, ever-growing pile of misconduct are still blocked from pursuing legal action by those pesky arbitration clauses. While the California law does not retroactively void those clauses, it gives judges the ability to override them as they see fit.
“The idea that consumers can be blocked from our public courts when their bank commits fraud and identity theft against them is simply un-American,” said the bill’s author, Senator Bill Dodd, in a statement to The L.A. Times.