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29 March 2017

Wells Fargo agrees to $110m class action settlement after fake account fallout

The embattled company wants to 'make it right' with customers and salvage whatever may be left of its tattered public reputation.

By Kathryn Higgins

Ken Wolter

In a deal announced on Tuesday, the San Francisco-based lender has agreed to pay out $110m to settle numerous class-action lawsuits across the United States. The lawsuits stem from revelations last year that Wells Fargo employees had opened up to 2 million unauthorised deposit and credit accounts in customers’ names in order to boost their own pay and, as alleged by some, fee income for the company. The latest settlement with customers comes after Wells Fargo agreed to pay $185m worth of fines and penalties in September last year as part of a settlement with federal regulators and the Los Angeles city attorney’s office.

Making things right

This agreement is another step in our journey to make things right with customers and rebuild trust,’ said Wells Fargo chief executive officer Tim Sloan of the settlement, which will need to be approved by a federal judge. ‘We want to ensure that each customer impacted by our sales practices issue has every opportunity for remediation, and this agreement presents an additional option.’

Long-lasting damage

However, despite Wells Fargo’s efforts to salve its public image, the settlement came alongside an announcement on Tuesday that regulators would slash the rating against the standards of the Community Reinvestment Act to its lowest level since 1994, citing an ‘extensive and pervasive pattern’ of abuses against customers. The black marks against Wells Fargo’s extend far beyond the recent accounts scandal and include everything from discriminatory practice against minority employees to non-judicial foreclosures, according to the watchdogs behind the downgrade.

Sources: Bloomberg BigLaw Business; City AM; Financial Times

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