Gov. Jerry Brown signed a bill Wednesday that protects the right of consumers to sue banks alleged to have created fraudulent accounts in their name. The legislation was prompted by the ongoing Wells Fargo & Co. scandal.

The bill, SB 33, was authored by Sen. Bill Dodd (D-Napa) and sponsored by State Treasurer John Chiang. It specifically prohibits banks from requiring disputes over fraudulent accounts to be sent to private binding arbitration, instead of being heard in a court.

Alan Kaplinsky, a Philadelphia attorney who pioneered the use of arbitration clauses, told The Times this spring that if the bill becomes law, he believes the Supreme Court would eventually overturn it.

“It clearly won’t stand up,” he said. “Really, there’s no doubt at all that the state law would be preempted.”

Read the full article here. Subscription may be required.

Related Practice