Wells Fargo Ups Sales Practices Settlement to $142M

SAN FRANCISCO (CN) – Wells Fargo will pay $142 million to settle class action claims that it secretly opened credit cards and unauthorized accounts in customers’ names going back to 2002.

The bank was hit hard by the discovery that its staff opened millions of bank accounts and credit cards for customers without their consent in an effort to meet internal sales goals.

Lead plaintiff Shahriar Jabbari sued Wells Fargo in May 2015, claiming it encouraged employees to use fraudulent and deceptive tactics to persuade customers to open fee-generating accounts by misrepresenting them or not informing them at all.

Wells Fargo called the tricks “solutions” and set “unrealistic sales quotas” for its employees, inducing them to add hidden fees and open unwanted second accounts for customers, Jabbari claimed. He said he had seven additional accounts opened without his consent and that his credit score was damaged by unpaid fees that were sent to a debt collector.

In September 2016, the bank said it was getting rid of its sales goals for credit cards and other banking products, after federal banking regulators slammed it with $185 million in fines. The fines will be divided with $100 million going to the Consumer Financial Protection Bureau, $50 million to the city and county of Los Angeles, $35 million to the Office of the Comptroller of the Currency and $5 million to victims.

Friday’s settlement is an expansion of an earlier agreement announced last month that adds $32 million to the payout and includes customers who had sham accounts opened without their knowledge starting in May 2002, the earliest the bank has data. Fees on accounts charged from 2009 through 2017 will be reimbursed fully, while earlier victims will be reimbursed at a flat rate.

Wells Fargo President and CEO Tim Sloan said in a statement that he hopes the settlement will help rebuild customers’ trust.

“The expansion of this agreement is another important step to make things right for our customers,” he said. “On our journey to rebuild trust, we want to ensure our customers feel confident that we have heard their concerns about retail sales practices, which includes offering them numerous opportunities for remediation.”

The proposed agreement requires judicial approval, and is set for a hearing on May 18 before U.S. District Judge Vincent Chhabria.

The settlement news comes one day after the bank also agreed to settle, for an undisclosed amount, a lawsuit claiming it steered troubled borrowers into the federal Home Affordable Mortgage Program to soak money from them, without ever intending to permanently modify their loans as promised.