Wells Fargo has agreed to pay $110 million to resolve a class-action lawsuit brought by customers over its fake-accounts scandal, the San Francisco-based bank announced Tuesday.
The settlement, which requires court approvals, is expected to encompass anyone who claims Wells’ employees opened accounts or enrolled them in products or services without their consent, over a period stretching to January 2009. The deal comes after Wells was fined $185 million in September by federal regulators and the city and county of Los Angeles for its sales practices.
In October, the Observer reported the bank was quietly hammering out the accord.
“This agreement is another step in our journey to make things right with customers and rebuild trust,” CEO Tim Sloan said in a statement.
Tuesday’s agreement stems from a class-action lawsuit filed in May 2015 by a Wells Fargo customer in California, Shahriar Jabbari, who claimed the bank opened seven accounts he did not authorize. In September 2015, Wells Fargo convinced a federal judge that the matter should be resolved in arbitration.
While that decision was being appealed, settlement discussions with the bank began, according to law firm Keller Rohrback, which represented Jabbari. A settlement was struck in early September.
If approved, the settlement will require Wells Fargo to repay fees it charged customers for unauthorized accounts and provide millions of dollars of additional monetary relief to the nationwide class, Derek Loeser, a Keller Rohrback partner who helped negotiate the deal, said in a statement.
Loeser called it “an outstanding result ... notwithstanding Wells Fargo’s effort to block the class action with an arbitration clause.”
Since the scandal, Wells Fargo’s forced-arbitration policies have created difficulties for customers seeking to sue the bank over accounts opened without their permission. Fine print in the bank’s account agreements have required customer disputes to be handled instead in arbitration, outside the court system.
The settlement also affects customers for whom the bank submitted applications for products or services in their name without their consent.
Wells Fargo said the agreement, filed in federal court in San Francisco, is expected to resolve claims in 11 other pending class actions involving unauthorized customer accounts or products and services customers were enrolled in without their consent.
“In order to move forward and avoid continued litigation, Wells Fargo agreed to this settlement notwithstanding the arbitration clause,” the bank said in its statement.
Wells said the $110 million will be set aside for customer remediation. After attorneys fees and other costs class members will be paid first for out-of-pocket losses such as fees incurred from unauthorized account openings, the bank said.
Any settlement funds remaining after out-of-pocket losses will be split among all class members, based on the number and kinds of unauthorized accounts or services claimed, the bank said.
Keller Rohrback said complete details of the settlement are expected to be made public in April, when the court is expected to be asked to give preliminary approval to the deal. If that is given, the court must still hold a fairness hearing to decide whether to grant final approval to the settlement.
The settlement announcement came the same day Wells Fargo disclosed that the regulator of national banks downgraded the bank’s latest Community Reinvestment Act rating to “needs to improve,” a fresh blow to the company as its seeks to recover from the accounts scandal.
Wells has previously said it’s reimbursed more than $3 million to customers affected by its sales practices.