Earlier Tuesday, Wells Fargo announced that its Community Reinvestment Act rating is being downgraded by the Office of the Comptroller of the Currency, due in part to the bank’s fake account scandal that led to a $185 million fine from the Consumer Financial Protection Bureau, the OCC, and the city and county of Los Angeles.
But the fallout from the fake account fiasco, which stemmed from more than 5,000 of the bank’s former employees opening more than 2 million fake accounts to get sales bonuses, is far from over.
In fact, the bank’s financial hit from the scandal is about to get worse, as the bank announced late Tuesday that it reached a $110 million settlement in a class action lawsuit brought on behalf of the bank’s customers who had a fake account opened in their name.
According to the bank, the settlement will cover people who claim that Wells Fargo opened an account in their name without their consent, enrolled them in a product or service without consent, or submitted an application for a product or service in their name without consent from Jan. 1, 2009, through the date the settlement is finalized.
The settlement is not yet finalized and still must be approved by the court.
The bank said that it expects this settlement to resolve claims in 11 other pending class action lawsuits that also claim that unauthorized accounts were opened in customers’ names or that customers were enrolled in products or services without their consent.
According to the bank, if the settlement is approved, the entire settlement amount of $110 million will be set aside for customer remediation, minus attorneys’ fees and costs of administration.
Per the terms of the settlement, class members will be paid first for out-of-pocket costs, like fees incurred because of the unauthorized account openings. Amounts remaining after out-of-pocket losses will be split among all claimants, based on the number and kinds of unauthorized accounts or services claimed, the bank said.
The bank notes that the two side in the lawsuit disputed where the arbitration clauses of Wells Fargo’s deposit agreements applied.
As this New York Times article notes, Wells Fargo pushed to have class action lawsuits moved into private arbitration rather than be handled in court. But Wells Fargo said Tuesday that in order to “move forward and avoid continued litigation,” the bank said that it agreed to the settlement notwithstanding the arbitration clause.
“This agreement is another step in our journey to make things right with customers and rebuild trust,” Tim Sloan, Wells Fargo’s president and chief executive officer, said.
“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,” Sloan continued. “We continue to encourage customers to contact us directly so that we can act quickly to refund fees and address any concerns.”
The bank said that it set aside the money for the settlement at the end of 2016.
Now, the settlement awaits approval from the court. If approved, Wells Fargo customers who believe the bank opened a fake account in their name will be able to submit a claim for their portion of the $110 million settlement.