A federal judge in San Francisco has signed off on Wells Fargo’s $142 million settlement in a class-action suit over the creation of more than 3.5 million phony accounts.
The agreement sets aside funds for customers who were harmed by the lender’s opening of savings and credit card accounts they hadn’t authorized and, in some cases, deducting fees for those services from existing checking accounts.
Their disclosure in a $185 million settlement with the Consumer Financial Protection Bureau and other federal and local regulators in 2016 led to the departure of then-CEO John Stump, customer and employee lawsuits, contentious congressional hearings and, ultimately, Federal Reserve restrictions on the bank’s size.
While the San Francisco-based lender’s shares rallied after an initial plummet, their 16 percent gain since is about half that of the broader S&P 500 and significantly below the performance of rivals Bank of America and Citigroup. All of them benefited from bets on economic improvement and looser regulation under President Trump and a Republican-led Congress.
U.S. District Judge Vince Chhabria’s decision in the civil suit marks “a significant step forward in making things right for our customers and further restoring trust,” Wells Fargo Chief Executive Officer Tim Sloan said in a statement on Friday.
The claims-filing period will remain open through July 7 for eligible customers, who may visit www.WFSettlement.com or call 866-431-8549, Wells Fargo said.
The class-action case was initially filed by Shahriar Jabbari, a California resident who said he opened two Wells Fargo accounts in 2011 and, within the next two years, discovered seven additional accounts had been opened in his name that he hadn’t authorized.
A bank employee conceded that they were opened without Jabbari’s consent, and he later received notices from debt-collection agencies about unpaid fees Wells Fargo had charged for the accounts, according to the lawsuit.
Sloan, who was prompted to his current role from the post of chief operating officer, has sought to refurbish Wells Fargo’s reputation in the aftermath by strengthening corporate oversight, eliminating sales goals for consumer branches and installing new managers. He also cooperated with the government on probes of other departments within the company.
In April, Wells Fargo agreed to pay $1 billion in civil penalties to settle investigations of its automotive- and mortgage-lending practices. The government penalized the lender for selling some auto borrowers insurance they didn’t need under the pretense they might not qualify for the loans otherwise, and for charging fees to mortgage customers that it was supposed to be absorbing.
Months prior, the Fed had imposed a cap on Wells Fargo’s growth until it improves corporate oversight, a move that Sloan has said will curb the lender’s profit by as much as $400 million.
The directive requires the San Francisco-based lender to keep its assets at or below the roughly $2 trillion held at the end of December 2017. At that time, it was the nation’s third-largest bank, behind New York-based JPMorgan Chase and Charlotte, N.C.-based Bank of America.
