Wells Fargo customers who were affected by the bank’s fake account scandal are one step closer to receiving their share a proposed $142 million settlement, after the judge overseeing the class action lawsuit granted preliminary approval to the settlement.
Back in September, the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the city and county of Los Angeles fined the bank $150 million for more than 5,000 of the bank’s former employees opening as many as 2 million fake accounts in order to get sales bonuses.
The fine also led to class action lawsuit brought on behalf of the bank’s customers who had a fake account opened in their name.
In March, Wells Fargo announced that it agreed to a $110 million settlement in the lawsuit, before increasing the settlement proposal from $110 million to $142 million to cover anyone who had a fake account opened in their name stretching back to 2002.
In May, the judge warned that Wells Fargo’s proposed $142 million settlement may not be enough money to compensate all the victims and asked that Wells Fargo guarantee that all of those affected customers would be fully compensated.
Wells Fargo followed the judge’s request and guaranteed that all of the affected customers would be repaid in full and fully compensated for any damage done to their financial records and credit scores.
Now, the settlement is one giant step closer to being finalized, as Wells Fargo announced this weekend that the U.S. District Court for the Northern District of California granted preliminary approval to the settlement.
“We are pleased that the court found the settlement to be fair, reasonable and adequate. This preliminary approval is a major milestone in our efforts to make things right for our customers,” Tim Sloan, Wells Fargo’s president and chief executive officer, said.
“It further ensures each customer impacted by an improper retail sales practice has every opportunity for remediation,” Sloan continued. “This is in addition to our direct efforts to review accounts and provide remediation. These efforts are fundamental to restoring trust with all our stakeholders and building a better Wells Fargo for the future.”
In a release, Wells Fargo said that it expects this settlement to resolve “substantially all claims in 10 other pending class actions that allege unauthorized accounts were opened in customers’ names or that customers were enrolled in products or services without their consent.”
Wells Fargo also said that over the next three months, it will conduct “broad outreach” to current and former customers, and notices will be issued to potential class members that will provide information about the process for making claims.
According to Wells Fargo, the settlement agreement sets $142 million aside for customer remediation and settlement expenses.
Wells Fargo said the settlement also includes a process to compensate customers for increased borrowing costs due to credit-score impact associated with a potentially unauthorized account.
According to Wells Fargo, a customer will receive compensation if their credit score dropped because of a potentially unauthorized account and the customer opened an authorized credit product with any lender during the time periods noted in the settlement.
Those payments will be determined by reviewing how much the customer’s credit score declined, the type and size of the subsequent authorized credit product, and other factors, Wells Fargo said.
Wells Fargo also noted that in the “unlikely event” that $142 million is not enough to fully reimburse customers for unauthorized account fees, compensate customers for harm to their credit, pay attorneys’ fees and expenses, and have at least $25 million left over to distribute to all class members, Wells Fargo is prepared to contribute additional money to the settlement.
Wells Fargo said that the settlement class consists of all people who claim that Wells Fargo opened a consumer or small business checking or savings account or an unsecured credit card or line of credit without their consent from May 1, 2002 to April 20, 2017. Also included in the settlement are customers who may have been enrolled in identity theft protection services without their knowledge or consent.