Wells Fargo & Co has agreed to pay $1 billion to settle a category motion lawsuit by shareholders over a series of scandals involving the treatment of consumers by a San Francisco-based bank.
The billion-dollar settlement is the newest lump sum the 171-year-old bank needed to pay to avoid litigation over illegal business practices – including opening 3.5 million accounts without customer consent, imposing unexpected overdraft fees on accounts, improper seizure of vehicles and illegal freezing of accounts.
Wells Fargo was recently fined a record $3.7 billion for settling charges related to those illegal practices in December. The massive sum included a $1.7 billion tremendous imposed by the Consumer Financial Protection Bureau – the most important such tremendous within the watchdog’s history.
Monday’s settlement with investors was filed late within the evening in federal court in Manhattan. The dollar amount was suggested by the mediator, stemmed from court papers, and required a judge’s approval before being deposited in an escrow account.
Attorneys and plaintiffs can claim as much as 19% of the settlement fund for legal fees.
As of 2018, the fourth-largest U.S. bank is working under instructions from the Federal Reserve and two other financial regulators requiring it to enhance governance and oversight after a series of alleged frauds between 2012 and 2016.
![Wells Fargo agreed to pay $1 billion to avoid the burden and costs of a lawsuit in which shareholders said the bank overstated how well it was complying with Fed orders and an asset limit that was imposed in 2018.](https://nypost.com/wp-content/uploads/sites/2/2023/05/NYPICHPDPICT000009622744.jpg?w=1024)
The Fed also imposed an asset limit of $1.93 trillion on Wells Fargo, hampering its ability to compete with rivals JPMorgan, Bank of America and Citigroup.
Monday’s $1 billion settlement follows shareholders’ accusations that Wells Fargo overreacted about how well it was carrying out central bank orders.
Court documents also show that the bank’s market value fell by greater than $54 million in two years, ending in March 2020 when wrongdoing was revealed.
In response to 2020 stop and desist order filed by the Securities and Exchange Commission to forestall Wells Fargo from committing any fraud in the longer term, the SEC alleged that Wells Fargo “misled investors” by claiming its strategy was “need-based” – “selling accounts to customers they need. ”
Nevertheless, the bank actually used a “volume-based sales model where employees were directed, pressured or coerced into selling large volumes of products to existing customers.”
Wells Fargo denied any wrongdoing in court documents.
San Francisco-based bank spokesman Sunny Rodriguez told The Post that “this deal resolves a consolidated securities class motion lawsuit involving the corporate and several other former executives and an executive who’ve been out of the corporate for several years.
“While we disagree with the allegations on this case, we’re pleased to have resolved the matter.”
In a March 3 letter to shareholders, chief executive Charlie Scharf nodded on the bank’s “culture, effective processes (and) appropriate management oversight to correct weaknesses in a timely manner.”
He also said that repairing the bank’s popularity took longer than expected when he took over as boss in 2019, in accordance with Reuters.