Judge Approves Settlement in Wells Fargo Accounts ScandalPrint Article
- Posted on: Jul 19 2017
A federal judge has given Well Fargo & Co. preliminary approval of its proposed $142 million class-action settlement to compensate millions of customers swept up in the fake account scandal that led to the ouster of CEO John Stumpf in October 2016.
Current Wells Fargo Chief Executive Tim Sloan said in a statement that the proposed settlement represents “a major milestone in our efforts to make things right for our customers.”
The Wells Fargo Scandal
The scandal broke in 2013 when it was revealed that thousands of Wells Fargo sales people were pressured to open new checking and savings accounts, credits cards, and lines of credit without customer approval in order to meet quotas.
The bank subsequently terminated more than 5,000 employees who were allegedly involved in the improper account openings. In September 2016, the bank agreed to pay regulators $185 million over allegations that it created approximately 2.1 million unauthorized accounts without customer approval.
The Class Action Settlement
One of the factors involved in working out the proposed settlement was determining how many customers were actually affected. Originally, the bank agreed to pay $110 million based on the the 2.1 million accounts identified in the deal with banking regulators. After an internal investigation revealed that company executives first learned of the unauthorized accounts problem in 2002, Wells Fargo increased the fund to $142 million. Attorneys for the plaintiffs estimated the number of unauthorized accounts to be as high as 3.5 million.
The proposed settlement will cover customers who had unauthorized accounts opened beginning May 1, 2002, and compensates customers for fees that were charged based on the number of unauthorized accounts. Moreover, the payout to customers whose credit was actually damaged by unauthorized credit card accounts is based on a formula that considers any loans they took out while their credit score was impaired.
Determining the settlement to be preliminarily “fair, reasonable and adequate,” the court scheduled a hearing for January 4, 2018, to decide whether to grant final approval of the settlement. Wells Fargo said the proposed settlement will resolve substantially all claims in ten other pending class actions over the account scandal. While aggrieved customers will receive notices about the claims process in the next three months, payments will not be made until after final court approval.