Wells Fargo to pay $108 million for allegedly overcharging veterans on refis

Settles lawsuit with the federal government

It seems that Wells Fargo literally can’t go one week without facing another scandal.

Exactly one week ago, Wells Fargo revealed its latest scandal, as the bank said that it is preparing to hand out $80 million in remediation for potentially wrongfully force-placing auto insurance on as many as 570,000 customers.

That scandal came as the bank is still dealing with the fallout from its fake account scandal, which saw the bank fined $185 million for more than 5,000 of the bank’s former employees opening more than 2 million potentially unauthorized accounts to get sales bonuses.

The bank is also nearing a $142 million settlement in a class action lawsuit brought by the customers affected by the fake accounts.

And now, just seven days after disclosing the force-placed auto insurance issue, Wells Fargo announced that it agreed to pay $108 million to the federal government to settle allegations that the bank overcharged military veterans for refinance loans.

Specifically, the issue relates to a lawsuit from 2006 that claimed some Department of Veterans Affairs Interest Rate Reduction Refinance Loans originated by Wells Fargo should not have been eligible for VA guarantees due to the bank allegedly collecting unauthorized fees with the loans.

The suit was filed in 2006 and unsealed in 2011, and sought compensation for the government over claims paid by the VA after those loans defaulted.

Under the agreement, Wells Fargo denies the allegations in the lawsuit but will pay $108 million to the government to resolve the claims, the bank said in a statement issued Friday. Where exactly this penalty will be paid to, the VA or some other branch of the Federal government, is not yet clarified.

The original lawsuit claimed that some of the VA IRRRLs in questions should not have eligible for VA guarantees because of “certain fees charged to the borrowers when the loans were originated.”

Wells Fargo settled a separate class action lawsuit in the matter back in 2011. That settlement included a $10 million refund that allowed all veterans who received a VA IRRRL from Wells Fargo between Jan. 20, 2004, and Oct. 7, 2010, to receive compensation whether the borrower paid the fees in question or not.

Reports at the time stated that there were approximately 60,000 VA loans refinanced in that time period, and each household was set to receive $175.

Now, Wells Fargo will pay $108 million more to the government to put the issue behind it.

“More than six years ago, when questions about fees on (VA) refinance loans were raised, we resolved those concerns by improving our internal controls and made compensation available to VA customers who closed a refinance before that time,” Tim Sloan, Wells Fargo’s chief executive officer, said in a statement.

“Settling this longstanding lawsuit allows us to put the matter behind us and continue to focus on serving customers and rebuilding trust with our stakeholders,” Sloan added. “We are committed to serving the financial health and well-being of veterans, and we will continue to honor that commitment now and in the future.” 

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