California closes the door on Wells Fargo's closed-door tack

New York

WELLS Fargo & Co's home state of California has passed a law aimed at curtailing the bank's use of closed-door arbitration to shroud complaints from aggrieved customers affected by its scandals.

Governor Jerry Brown signed a measure inspired by the San Francisco-based lender's fake-accounts scandal. It prohibits financial firms from forcing customers out of court and into arbitration to settle disputes when employees used clients' information to commit fraud.

Regulators fined Wells Fargo US$185 million last year over its widespread practice of opening current and credit accounts without customers' authorisation to meet aggressive sales goals. The company said in August that a more inclusive review found employees may have created 3.5 million bogus accounts. Wells Fargo has also been embroiled in other consumer spats in recent months over unwanted car insurance, mortga…