Wells Fargo has agreed to pay $1 billion to settle a category motion lawsuit introduced by shareholders who’ve accused the financial institution of deceptive them about its progress in recovering from a collection of scandals.
The lawsuit, filed in 2020, alleged that Wells Fargo overestimated how rapidly the corporate cleaned up after staff opened tens of millions of faux accounts on behalf of shoppers to fulfill income objectives. The financial institution was fined $185 million by regulators in 2018 and compelled to challenge a consent order that restricted its development and compelled it to enhance its oversight and governance.
The shareholders who filed the lawsuit allege that Wells Fargo administration made deceptive statements concerning the financial institution’s progress in recovering from the scandal so as to preserve their jobs and increase the financial institution’s inventory worth.
Below the phrases of the settlement, Wells Fargo pays $1 billion to the shareholders who filed the lawsuit. The cash will probably be distributed to shareholders who owned Wells Fargo inventory between October 2016 and October 2018.
The settlement is topic to approval by a federal choose.
The settlement is the newest in a collection of authorized setbacks for Wells Fargo. The financial institution has additionally been sued by clients harmed by the faux account scandal, and regulators are nonetheless investigating it.
The scandal has broken Wells Fargo’s popularity and made it troublesome for the financial institution to draw new clients and buyers. The settlement is an indication that Wells Fargo remains to be struggling to get well from the scandal, and it stays to be seen if the financial institution can totally restore its popularity.
Along with the $1 billion settlement, Wells Fargo has additionally agreed to make a lot of modifications to its company governance and regulatory practices. These modifications are supposed to stop one other scandal from occurring sooner or later.
Adjustments embody the creation of a brand new board committee to supervise the financial institution’s compliance with legal guidelines and rules, and the appointment of a brand new chief compliance officer. Wells Fargo has additionally agreed to introduce a brand new worker ethics and compliance coaching program.
The modifications are a step in the suitable path, however it stays to be seen if they will be sufficient to stop one other scandal at Wells Fargo. The financial institution has lengthy had points with its company tradition and it’ll take various modifications to repair the issues.