A federal judge has raised issues with a proposed $142-million settlement between Wells Fargo and customers over the creation of unauthorized bank accounts.
James Rufus Koren
May 17, 2017
A San Francisco federal judge is leaning toward rejecting some of the terms of a $142-million settlement aimed at ending a bevvy of class-action lawsuits against Wells Fargo & Co. over its sham accounts scandal.
In a filing Wednesday, U.S. District Judge Vince Chhabria asked attorneys on both sides for more information about claims made last week by plaintiffs’ attorneys that as many as 3.5 million bogus checking, savings and credit card accounts may have been created by the bank.
That figure is far more than the 2.1 million accounts the bank had estimated when it reached a $185-million settlement with regulators in September.
Chhabria, in a request for additional information, questioned whether the parties have the ability to accurately estimate the number of bank customers who may be eligible to participate in the settlement.
“If so, what are those estimates and how were they reached? If not, why not?” asked Chhabria, who will preside over a hearing on the proposed settlement Thursday.
The estimate of 2.1 million was based on a review by the bank of accounts created between May 2011 and July 2015, while the new figure is an estimate of unauthorized accounts created between 2002 and this year.
The higher figure was predicated on a recent internal investigation by the bank that concluded the practice of opening unauthorized accounts may have started as early as 2002.
Bank spokesman Ancel Martinez has called the higher figure an unverified estimate that is “based on a hypothetical scenario.”
Chhabria has other issues with the proposed settlement too, suggesting that some terms will have to be changed.
For instance, attorneys representing clients in a separate class-action lawsuit over improper bank overdraft practices argued in a filing this week that the terms of the unauthorized accounts settlement could force their clients to give up their claims against the bank.
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