Wells Fargo has agreed to pay $1 billion to settle a class action lawsuit accusing the bank of exaggerating the amount of progress it has made in fixing illegal practices that regulators said have harmed millions of customers.
The agreement, detailed in court filings on Monday, is the latest in a series of settlements and penalties the bank has paid as a result of a fraud scandal that came to light nearly a decade ago. From 2002 to 2016, bank employees, faced with unrealistic sales targets imposed by their bosses, opened millions of accounts in customers’ names without their knowledge.
Wells Fargo removed the top executives and promised to regulators that it would fix the internal deficiencies that caused the scandal and other practices that put customers at risk.
The latest settlement resolves a lawsuit filed on behalf of shareholders that focused on the bank’s conduct from 2018 to 2020, after regulators identified several problems. Prosecutors, including pension funds in Mississippi, Rhode Island and Louisiana, said Wells Fargo defrauded investors by giving the false impression that it was much more in the process of processing regulators’ orders than it disclosed at the time. The settlement, which must be approved by a New York federal judge, was previously reported before The Wall Street Journal.
Wells Fargo, which could not immediately be reached for comment, said it is working to address issues that have led to lawsuits and regulatory penalties.
Controversies have engulfed Wells Fargo for years, including bogus accounts, improper mortgage changes, and accidental releases of customer data.
In December, the bank agreed to pay $3.7 billion to settle claims by the Consumer Financial Protection Bureau that it was involved in a range of banking abuses. Wells Fargo has agreed to pay $3 billion in 2020 to settle investigations into consumer abuse that have dragged on for more than a decade.
The bank’s CEO has been impeached twice in the past seven years: John G. Stumpf in 2016, and Timothy Sloan in 2019. The senior CEO, Cary L. scandal and faces up to 16 months in prison.
The settlement announced Monday is subject to court approval.
“If approved, this settlement will help compensate hundreds of thousands of investors — state employees, nurses, teachers, police, firefighters and others — whose critical retirement savings have been impacted by Wells Fargo’s fraudulent business practices,” Stephen J. Toole, managing partner at Wells Fargo, said Cohen-Milstein. Sellers & Tool, which represented the investors in the lawsuit, in a statement.
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