The shareholders accused the company of giving misleading information about its recovery from a series of scandals, including opening about 3.5 million accounts without the permission of the customers and charging them for auto insurance
Wells Fargo to resolve lawsuit related to 2016 scandal. (Credit: joão vincient lewis on Unsplash)
US-based financial services company Wells Fargo has agreed to pay $1bn to its shareholders to resolve a lawsuit related to its unauthorised accounts scandal in 2016.
In the lawsuit, the shareholders accused the company of giving misleading information about its recovery from a series of scandals related to customer accounts.
The bank opened about 3.5 million accounts without customers’ permission and charged them for auto insurance, which they did not need.
The US District Judge in Manhattan federal court, Gregory Woods, has granted preliminary approval for the settlement, with a hearing for final approval scheduled on 8 September 2023.
Wells Fargo has operated under consent orders from the Federal Reserve and two other financial regulators since 2018 to improve its governance, reported Reuters.
The federal agencies also placed an asset cap, which limits the company’s growth and ability to compete with rivals JPMorgan Chase & Co, Bank of America, and Citigroup.
According to the lawsuit, Wells Fargo was not compliant with the regulators’ requirements for satisfying the 2018 Consent Orders and lifting the asset cap.
However, the bank’s executives allegedly made misleading statements about its status of compliance with the 2018 Consent Orders.
The misleading statements resulted in a fall of the company’s market value by more than $54bn over a period of two years ending in March 2020.
Wells Fargo spokesperson said: “This agreement resolves a consolidated securities class action lawsuit involving the company and several former executives and a director, who have not been with the company for several years. While we disagree with the allegations in this case, we are pleased to have resolved this matter.”
Since 2016, Wells Fargo has paid or set aside several billion dollars to resolve regulatory probes and litigation over its business practices.
The bank’s fake accounts scandal related to its executives and directors was valued at $320m, and a 2018 shareholder accord cost the company $480m.
In 2020, Wells Fargo agreed to pay $3bn to settle an investigation into widespread consumer abuses for more than a decade, avoiding criminal charges.
Earlier this year, the US lender has been fined $97.8m for shortcomings in implementing the country’s sanctions against certain countries.