In last-minute deal, Wells Fargo ups sham-account settlement to $142 million

Wells Fargo & Co. has agreed to boost its payout in a class-action settlement over unauthorized accounts to $142 million, up from the $110 million it announced just three weeks ago, according to documents filed late Thursday.

The scandal-rocked bank agreed to the larger settlement after an internal report released last week showed that bank officials knew about unethical sales practices — including the creation of debit cards without customers’ authorization — as early as 2002.

The settlement as proposed last month would have covered customers who had unauthorized accounts opened for them in 2009 or later. Now the bank has added $32 million to the pot and agreed to pay customers affected by that practice going back to 2002. A federal judge must still sign off on the deal.

Settlement documents filed in federal court in San Francisco late Thursday did not make clear how many customers may be eligible for the settlement or how many additional customers will be eligible because of the extension.

The bank’s agreement to the new terms could be part of an effort to show contrition ahead of the company’s annual shareholder meeting, which is to be held at a Florida resort on Tuesday.

Investment advisory groups and California’s state treasurer have called on investors to vote against many of the company’s board members to chide them for lax oversight of the bank in the years leading up the the scandal.

The proposed settlement is the result of negotiations between Wells Fargo and attorneys at Seattle law firm Keller Rohrback, who represent a handful of bank customers from Northern California.

In that case, filed two years ago in federal court in San Francisco, plaintiffs alleged that bank workers, driven by onerous sales goals, opened accounts for customers without authorization — precisely the kind of conduct that the Los Angeles Times first reported in 2013 and that Wells Fargo has since admitted to.

The settlement would put an end to the 2015 lawsuit, Jabbari et al vs. Wells Fargo & Co., but would apply to all customers who had unauthorized accounts opened in their name.

That means the settlement, if approved by U.S. District Judge Vince Chhabria, would effectively put an end to nearly a dozen similar cases filed across the country in the months after the bank’s misdeeds came to light last year.

Now that the settlement plan has been filed, attorneys representing plaintiffs in those cases can have until May 4 to voice their support or opposition to the proposed deal. A hearing on the proposal is scheduled for May 18.

Last month, some attorneys said they would object, saying the original $110 million Wells Fargo agreed to pay was too low and that customers could get a better deal if they continued to fight the bank in court. That argument may continue even with the larger proposed payout.

But customers so far have had limited success in suing the bank. When customers open Wells Fargo accounts, they sign a contract that requires customers to settle disputes with the bank in private arbitration rather than in court.

Chhabria and some state court judges have ruled that those arbitration agreements mean that customers must go to arbitration, even if they allege the bank created unauthorized accounts in their name.

Despite that, attorneys in other jurisdictions say they believe their cases might be allowed to proceed in court rather than being pushed into arbitration.

Attorneys at Keller Rohrback addressed that issue in Thursday’s filing, saying that the odds of any court case being allowed to proceed is low and that the settlement represents the best deal bank customers are likely to get.

Source link