Preliminary approval for compensation amounting to $142 million has been given to Wells Fargo by a federal judge sitting in the state of California. This now allows the bank to compensate customers who were harmed when their credit scores were used by employees of the San Francisco-based financial institution to create fake accounts. Customers of Wells Fargo whose credit score fell because a fake account had been created in their name will be among those to be compensated.
Following the decision of the federal judge, the complainants in the lawsuit will in the near future get information on how they can proceed to claim settlement benefits. There will be a hearing on January 4, 2017 with a view to granting the deal a final approval.
“The settlement is an important component of holding Wells Fargo accountable for its abuse of its customers’ trust,” said Derek Loeser, lead attorney in the lawsuit and a partner at the law firm of Keller Rohrback, in a statement.
Making things right
Tim Sloan, the chief executive officer of Wells Fargo also said that he welcomed the preliminary approval since it gave the bank an opportunity to address its customers’ grievances. Wells Fargo will consequently provide information in the coming three months on how claims can be made by both current and former customers of the bank. Payments will however only be made once the court has given the final approval.
The bank also said that it was also expecting the settlement to be adequate in resolving claims in ten other class action lawsuits which are pending.
Last year in September, Wells Fargo consented to a deal to pay $185 million to regulators following accusations that approximately 2.1 million lines of credit, credit cards, and savings and checking accounts had been created without the approval of customers. The scandal caused the chief executive officer of the San Francisco-based bank, John Stumpf, to resign in October.
Before reaching a settlement, one of the big hurdles that had presented itself was a way to determine the number of customers the bank’s practices had affected. The original settlement terms had offered $110 million in compensation based on the estimates that had been provided by regulators.
Three months ago, however, the bank agreed to increase the amount to $142 million following an internal investigation which revealed that the scandal was first noticed by executives 15 years ago. Consequently, attorneys representing the plaintiffs raised the estimated number of affected customers to 3.5 million.