Wells Fargo & CompanyWFC has received the judge's approval for the settlement of $142 million worth class-action lawsuit related to the 3.5 million fake accounts scandal. However, customers still have scope for filing a claim if they feel they too have been wronged by the bank.
The class-action lawsuit was an outcome of the bank's undue pressure on its employees to achieve extensive sales targets, which led them to open unauthorized savings accounts, credit cards and lines of credit from May 2002 to April 2017.
The U.S. District Judge Vince Chhabria feels that the settlement is an "imperfect solution", but there was no alternative. He also said, "Class actions are to some degree rough justice, but I do believe this settlement is fair."
The settlement would entertain claims of those clients who have been charged fees on the accounts that were opened without their consent. Also, refunds would be made to customers whose credit scores have been impacted by Wells Fargo's improper practice and led to higher borrowing costs for them. Lastly, the remaining amount will be distributed equally among the claimants.
Wells Fargo has also been ordered to file some additional paper work that would contain an oversight mechanism to ensure the settlement is fully enforced before its attorneys receive their $21 million share.
Since the breakout of scandal in September 2016, Wells Fargo made a lot of changes in its staff levels and practices, yet it continued to be involved in a number of legal issues. Recently, the bank settled a consolidated securities fraud class action suit related to the fake-accounts scandal filed in the United States District Court for the Northern District of California for $480 million.
The Sans Francisco-based bank has been paying a number of penalties on this probe since 2016. With this recently announced settlement, the bank would finally get a chance to move ahead of past misconducts.
Wells Fargo's impressive cost-control plan for 2018 will help it deal with the high cost base. Also, the bank's efforts to better its image among customers and the improving economic backdrop might support its growth in the near term.
Shares of Wells Fargo have lost 9.8% year to date compared with the industry 's decline of 2.3%.
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