California took another step on Tuesday toward allowing state residents to sue financial institutions for fraud, rather than letting banks force customers to settle disputes in arbitration, as a bill inspired by last year’s Wells Fargo scandal passed a key Assembly committee.
The bill has already passed the state Senate. The full Assembly, the legislature’s lower chamber, is expected to approve it in a vote toward the end of August, after the summer recess.
Under the bill, judges could override contract clauses that require customers to settle disputes through arbitration in cases where a bank commits fraud using customers’ personal information. Arbitration clauses, which have become standard practice since a 2011 U.S. Supreme Court decision, make consumers agree not to sue in the future as a condition of purchasing products or services.