Summary: Wells Fargo has offered to settle its first class-action lawsuit arising from its fake account scandal.
On Tuesday, Wells Fargo agreed to settle a class-action lawsuit from angry customers who said that the shady megabank opened accounts in their name without their permission. The scheme lasted for years and was enacted by stressed-out employees trying to make high sales quotas, and it resulted in customers paying fees unknowingly, netting Wells Fargo millions.
The class-action was filed in May of 2015 in California by Shahriar Jabbari and Kaylee Heffelfinger (Jabbari v. Wells Fargo, N.A., et al.). The lawsuit said that since 2009, Wells Fargo employees secretly opened accounts and charged fees to customers because they were pressured to make sales by higher-ups.
Wells Fargo said that this settlement will cover “all persons who claim that Wells Fargo opened an account in their name without consent, enrolled them in a product or service without consent, or submitted an application for a product or service in their name without consent.”
According to Wells Fargo’s press release, “After attorneys’ fees and costs of administration, class members will be paid first for out-of-pocket losses, such as fees incurred due to unauthorized account openings. Amounts remaining after out-of-pocket losses will be split among all claimants, based on the number and kinds of unauthorized accounts or services claimed.”
Wells Fargo opened nearly two million fake accounts tied to real customers’ information. The U.S. government fined the bank $185 million last September after an investigation by the US Consumer Financial Protection Bureau (CSFB), and then-CEO John Stumpf resigned in the wake of the scandal. Democratic senator Elizabeth Warren famously told Stumpf that he and other Wells Fargo executives should be in jail.
Wells Fargo’s new president and CEO Tim Sloan said that this settlement was “another step in our journey to make things right with customers and rebuild trust.” Since the scandal, the San Francisco-based company said it had experienced sharp declines in new customer sign-ups.
Tuesday’s settlement has not yet been approved by the court. According to Wells Fargo, “If the court grants preliminary approval of the settlement agreement, a notice will be issued providing information concerning the process for making claims, and customers who believe they should be included in this suit will be able to submit claims. The court also will need to grant final approval of the settlement before payments will be made to class members. In the meantime, customers do not need to take any action to be included in the class subject to this agreement; however, as always, they are encouraged to contact Wells Fargo to discuss any account issues.”
Wells Fargo is also facing 11 other class-action lawsuits related to their fraudulent practices. According to USA Today, the bank said it hopes that this agreement will end the other suits.
Wells Fargo also revealed to USA Today that the Office of the Comptroller of the Currency had downgraded its rating. The federal regulator monitors and promotes banking practices to low-income and minority communities, and it said that because of Wells Fargo’s sales practices, the bank will now face more restrictions, which includes opening branches or making acquisitions.
- Related: Former Wells Fargo Employees File Class Action Lawsuit
- Related: Wells Fargo Employees Caught Creating Millions of Fake Accounts to Collect Fees
- Related: Wells Fargo Private Bank’s Survey Shows Rate Increases Helped Gross Revenue
Photo courtesy of U.S. News and World Report