Wells Fargo Expands Account Scandal Settlement
Banking giant Wells Fargo (NYSE:WFC) has announced that it is expanding the settlement it reached over charges that it fraudulently opened bank and credit accounts in customers’ names. Wells Fargo said it will add $32 million to the previous agreement, which will now total $142 million in restitution. The expansion is intended to cover more customer accounts, now going back as far as May 2002. Wells Fargo CEO Tim Sloan said, “The expansion of this agreement is another important step to make things right four our customers.”
The company came under fire last year when it was discovered that its employees had been opening fraudulent accounts to meet impossible sales goals. Up to 2 million unauthorized accounts were opened by the bank’s employees. The accounts were opened primarily in the Los Angeles and Arizona markets, with fewer established in North Carolina and South Carolina. Regulators have fined the bank $185 million over the scandal.
A report from the board’s independent investigation, which was released April 10, found unethical sales practices permeated the company. In the report, the board officially placed most of the blame on the community banking division, led by Carrie Tolstedt, and former chairman and chief executive John Stumpf. The board recently increased the amount of executive compensation clawbacks from Stumpf and Tolstedt by an additional $75 million. The total executive compensation clawback has risen to more than $180 million.
The class-action lawsuit was filed in May 2015 in the Northern District of California. The bank originally reached an agreement on March 28 to settle the class-action suit for $110 million. The bank says the settlement class now will consist of all customers who claim Wells Fargo opened an account in their name without 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 May 1, 2002, through April 20, 2017. That would mean that its fraudulent customer-account scandal dates back nearly 15 years.
The bank says the settlement will include reimbursement of fees, compensation for damage to credit, and additional compensation paid from the net settlement fund. A statement from the company says, “We encourage any customer with concerns or questions about their accounts to contact us.” Customers should contact the company directly by visiting a branch or calling 1-877-924-8697.
Wells Fargo said it expects the settlement in the Northern District of California to resolve claims in 11 other pending class action lawsuits. The bank said that as of Friday, it has paid $3.2 million in refunds to customers. Its board has faced significant investor criticism for its handling of the scandal. Calls have been made for a majority of the members to resign or be rejected by shareholders at Tuesday’s 2017 shareholder meeting.