Wells Fargo says closer to reaching US$142 million phony accounts settlement

A California judge has granted a preliminary approval for Wells Fargo & Co’s agreement to pay US$142 million, and perhaps more, to customers whose credit scores were harmed by its employees creating fake accounts in their names, the bank said.

Wells Fargo has set aside that money to compensate customers who are part of a class- action lawsuit involving claims regarding consumer or small business bank accounts, credit cards or loans, as well as identity theft protection, between May 2002 and April of this year.

It plans to begin reaching out to those affected customers soon.

In the ‘unlikely event’ that there are so many claims, and there is not US$25 million left over to distribute across all customers involved in the lawsuit, Wells Fargo said it will pay more.

The bank reached the settlement in April, according to a regulatory filing, but the judge’s preliminary approval moves the deal to the next step.

Wells Fargo has previously said thousands of branch employees created as many as 2.1 million bank and credit card accounts in individuals’ names without their permission to artificially hit sales goals.

Lawyers representing the claimants said 3.5 million accounts were created, according to a May 12 story by the Los Angeles Times.

If US District Judge Vince Chhabria grants final approval to the deal, it could help Wells Fargo chip away at a bevy of legal and regulatory issues stemming from the scandal, which erupted in September after it reached a US$185 million settlement with a Los Angeles prosecutor and the Consumer Financial Protection Bureau.

Wel ls sti l l faces probes from federal, state and local government agencies, including the US Department of Justice, as well as a number of private lawsuits, according to its quarterly securities filing in May.

In a statement, the bank’s chief executive, Tim Sloan, said he was ‘pleased’ that the court approved the preliminary settlement and considered it “a major milestone in our efforts to make things right for our customers.”

If the agreement receives final approval the bank expects it will close out the vast majority of claims in 10 class action lawsuits related to the one it is trying to settle. — Reuters

A Wells Fargo branch is seen in the Chicago suburb of Evanston, Illinois. A California judge has granted a preliminary approval for Wells Fargo & Co’s agreement to pay US$142 million, and perhaps more, to customers whose credit scores were harmed by...