Wells Fargo & Co has agreed to pay $1 billion to settle a class-action lawsuit from shareholders over a series of scandals related to the San Francisco-based bank’s treatment of customers.
The billion-dollar settlement is the latest lump sum the 171-year-old bank has had to pay to escape litigation over its illegal business practices — which include opening 3.5 million accounts without customers’ permission, imposing surprise overdraft fees on accounts, improperly seizing vehicles, and unlawfully freezing accounts.
Most recently, Wells Fargo was hit with a record $3.7 billion fine to settle charges related to these illegal practices in December. The massive sum included a $1.7 billion fine imposed by the Consumer Financial Protection Bureau — the largest of its kind in the watchdog agency’s history.
Monday’s preliminary settlement with investors was filed late Monday in Manhattan federal court. The dollar amount was suggested by a mediator, the court documents showed and required a judge’s approval before being deposited into an escrow account.
Lawyers and plaintiffs may seek up to 19% of the settlement fund for legal fees.
Since 2018, the fourth-largest US bank has operated under consent orders from the Federal Reserve and two other financial regulators requiring that it improve governance and oversight following a string of alleged fraud from 2012 to 2016.
The Fed also put a $1.93 trillion asset cap on Wells Fargo, stunting its ability to compete with rivals JPMorgan, Bank of America, and Citigroup.
Monday’s billion-dollar settlement is the result of shareholders’ accusations that Wells Fargo overstated how well it was complying with the central bank’s orders.
Court documents also said the bank’s market value fell by more than $54 million over two years, ending March 2020, as wrongdoings became known.
According to a 2020 cease and desist order filed by the Securities and Exchange Commission to prevent Wells Fargo from committing any fraud in the future, the SEC alleged that Wells Fargo “misled investors” by claiming its strategy was “needs-based” — “to sell customers the accounts that they needed.”
However, the bank was actually making use of “a volume-based sales model in which employees were directed, pressured or caused to sell large volumes of products to existing customers.”
Wells Fargo denied any wrongdoing in the court documents.
A spokesperson for the San Francisco bank, Sunny Rodriguez, told The Post that “this agreement resolves a consolidated securities class action lawsuit involving the company and several former executives and a director, who have not been with the company for several years.
“While we disagree with the allegations in this case, we are pleased to have resolved this matter.”
In a March 3 letter to shareholders, chief executive Charlie Scharf nodded to the bank’s “culture, effective processes (and) appropriate management oversight in place to remediate weaknesses on a timely bases.”
He also said that repairing the bank’s reputation has taken longer than expected when he took over the boss role in 2019, according to Reuters.
This story originally appeared on NYPost
