Mortgage News - $1 Billion Settlement Reached As Wells Fargo Agrees To Resolve Lawsuit

$1 Billion Settlement Reached As Wells Fargo Agrees To Resolve Lawsuit

Mortgage News May 26, 2023

Wells Fargo has reached a settlement with its shareholders in which they will pay $1 billion. The lawsuit, filed by the shareholders, accused the bank of issuing deceptive statements regarding its adherence to federal regulations following the revelation of a fraudulent account-opening scandal in 2016.

A lawsuit representing public employees from Rhode Island and Mississippi, who had invested in Wells Fargo, has received preliminary approval from a federal judge in New York. The settlement follows repeated sanctions against Wells Fargo for consumer protection law violations dating back to 2016. During that time, employees opened unauthorized accounts to meet sales targets, leading to financial harm for customers and artificial stock inflation.

Wells Fargo, headquartered in San Francisco, remains subject to a Federal Reserve order that prohibits its expansion until the bank addresses its internal oversight issues. Initially set to last for a year or two starting in 2018, the order has persisted due to the bank’s violations of consumer protection laws in areas such as auto and mortgage lending. The recently settled shareholder lawsuit claimed that between May 2018 and March 2020, the bank and its top executives consistently assured investors that regulators were content with the bank’s progress under the consent orders and that the asset cap would be lifted promptly.

Despite the bank’s disagreement with the allegations, Wells Fargo expressed satisfaction with resolving the recently settled case. Last year, the bank agreed to a $3.7 billion settlement for charges related to improper fees and interest on auto loans, mortgages, and erroneous application of overdraft fees. Wells Fargo has faced numerous fines, leadership changes, and reputational damage since the 2016 fake accounts scandal, with its standing in the industry remaining tarnished.

Prior to the scandal, Wells Fargo enjoyed a highly regarded reputation among major banks. However, undisclosed to the public, the bank’s upper management set ambitious and unachievable sales targets. On Tuesday last week, Wells Fargo’s stock closed approximately 1% lower at $38.39, nearing its lowest point in 2023.

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$1 Billion Settlement Reached As Wells Fargo Agrees To Resolve Lawsuit

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