Wells Fargo will pay $1 bn in class action lawsuit

Wells Fargo will pay $1 billion to settle a lawsuit which accused it of defrauding shareholders. The exercise involved the San Francisco-headquartered bank reportedly defrauding shareholders about its progress in recovering from a series of scandals over its treatment of customers.

The settlement would be an all-cash one, according to a preliminary approval granted by the US district judge Gregory Woods in Manhattan federal court.

The final approval’s hearing has been scheduled for September 8.

Wells Fargo has operated since 2018 under consent orders from the Federal Reserve and two other financial regulators requiring that it improve governance and oversight.

Wells Fargo is the fourth largest US bank. It is also subject to an asset cap by the Feds. This asset cap limits its growth and furthermore, depletes its ability to compete with its competitors such as JPMorgan, Bank of America Corp and CItigroup Inc.

Wells Fargo overstated its compliance-related developments: Shareholders

Shareholders accused Wells Fargo of overstating how well it was complying with Feds’ orders. They further stated that the bank’s market value fell by more than $54 billion over two years ending in March 2020 as the shortcomings became known.

The San Francisco-based bank denied wrongdoing, and settled to eliminate the burden and cost of litigation, court papers show.

“While we disagree with the allegations in this case, we are pleased to have resolved this matter,” Wells Fargo said in a statement.

Lawyers for the plaintiffs may seek up to 19  per cent of the settlement fund for legal fees.

Wells Fargo has since 2016 paid or set aside several billion dollars to resolve regulatory probes and litigation over its business practices.

ALSO WATCH | World Business Watch: U.S. banks get ready for profit crunch

These practices included opening about 3.5 million accounts without customer permission, and charging hundreds of thousands of borrowers for auto insurance they did not need.

Chief Executive Charlie Scharf has said repairing the 171-year-old bank founded by Henry Wells and William Fargo has taken longer than he expected when he took over in 2019.

“When I arrived, we did not have the culture, effective processes, or appropriate management oversight in place to remediate weaknesses on a timely basis,” he said in his March 3 letter to shareholders. “Today, we approach these issues differently.”

(With inputs from agencies)

You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here.