Wells Fargo Persists in 'Lawless Ways,' Suit Claims
What You Need to Know
The suit alleges Wells Fargo made legal and fiduciary violations despite big settlements.
Wells Fargo faces shareholder suits over multiple allegations.
Separately, a judge dismissed another suit related to fake interviews allegedly conducted to meet diversity quotas.
Wells Fargo continues to act in “lawless ways,” including renewing allegedly discriminatory practices in home loan lending, despite having recently paid $4.7 billion to resolve claims over inadequate risk compliance programs and infrastructure, according to a shareholder lawsuit.
Trustees of the Sheet Metal Workers Local No. 33 Pension Fund filed a shareholder derivative lawsuit in U.S. District Court for the Northern District of California in July seeking redress “for Wells Fargo’s lawlessness under their stewardship.”
The lawsuit, which seeks damages and other relief, refers to the company as “an unwieldy conglomeration of randomly acquired banking companies merged over the past decades. The result is a behemoth, mega-bank prone to corporate scandal and general lawlessness.”
The complaint cited comments from U.S. lawmakers who criticized Wells Fargo for alleged corruption and mismanagement and from the Consumer Financial Protection Bureau’s director, who late last year said that “Wells Fargo’s rinse-repeat cycle of violating the law has harmed millions of American families.”
In December, Wells Fargo paid a record $3.7 billion to resolve legal liability arising from what regulators described as widespread mismanagement of auto loans, mortgages and deposit accounts. The company agreed to the consent order in the case without admitting or denying regulators’ allegations.
The alleged mismanagement included repeatedly misapplying loan payments, wrongfully foreclosing on homes and illegally repossessing vehicles, incorrectly assessing fees and interest, charging surprise overdraft fees, and other illegal activity affecting over 16 million consumer accounts, according to the CFPB.
In May, Wells Fargo, while disagreeing with allegations, agreed to pay an additional $1 billion to settle a lawsuit contending the company had misled shareholders about its progress in complying with regulatory consent orders to remedy practices related to alleged mistreatment of customers, the new lawsuit notes.
The company has been subject to multiple regulatory orders and fines over several years covering various allegations. These include, for example, its 2020 agreement to pay $3 billion to resolve potential liability over opening millions of unauthorized bank accounts.
The July complaint alleges Wells Fargo has made false and misleading statements about its complaince, risk mitigation, remediation activities and its commitment to non-discriminatory lending, which has led to costly lawsuits, investigations and regulatory proceedings.
“Still today doubt remains whether Wells Fargo is operating lawfully. A Bloomberg report in March 2022 found that Wells Fargo was the only major U.S. lender to reject more African American mortgage refinancing applications than it approved in the 2020 mortgage refinancing boom,” the complaint states.
‘Law-Breaker’
“Wells Fargo approved 72% of white mortgage applicants in the same period, Bloomberg found. For historical context, in 2012, Wells Fargo promised not to discriminate against qualified African American mortgage borrowers in a $234.3 million settlement with the U.S. Department of Justice … a promise that Wells Fargo has not kept.”
“Wells Fargo is a law-breaker and so too are defendants (current or former directors or officers) for not stopping Wells Fargo’s serial violations of law. Accordingly, plaintiffs bring this action to hold defendants accountable for breaching their fiduciary duties,” the complaint says.
Neither Wells Fargo nor its board adopted internal controls and risk infrastructure despite agreements made in consent orders to do so, according to the suit, which alleges, “In the face of red flags, defendants also did not stop Wells Fargo’s violations of law across large and varied parts of its business.”
