Judge Wants More Claimant-Friendly Terms in $142M Wells Fargo Settlement

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A federal judge says he will grant preliminary approval to new terms of a Wells Fargo class action settlement, conditional on certain changes.

U.S. District Judge Vince Chhabria issued an order this past Wednesday indicating his intent to grant preliminary approval of the new terms. The changes to the settlement will provide additional relief to plaintiff Class Members who were allegedly harmed by Wells Fargo’s practice of opening millions of new accounts without authorization.

The new terms will bring the total value of the Wells Fargo class action settlement up to $142 million. The fund will be used to compensate around 3.5 million Class Members in whose name Wells Fargo allegedly created unauthorized new accounts between May 2002 and April 2017.

Preliminary approval of the new settlement terms is conditional on the parties’ submitting an updated settlement agreement that complies with the requirements laid out in Judge Chhabria’s order.

According to the judge, the new agreement should provide more time for settlement administration. Claimants should have more time to file claims, and the court should have more time to evaluate the work of the settlement administrator and its credit injury experts.

The judge also wants the option of appointing a special master, at Wells Fargo’s expense, to oversee the administrator’s evaluation of Class Members’ alleged credit injuries.

Judge Chhabria asked the parties to consider his suggestions for implementing a more thorough notice procedure, such as by sending email notification to current Wells Fargo customers. The judge also wants the settlement administrator to set up an online method by which Class Members can object to or opt out of the settlement.

In addition to the changes in settlement administration, Judge Chhabria expects the new terms to provide Class Members with a robust mechanism for repairing damaged credit scores.

The current litigation originated in May 2015, when plaintiff Shahriar Jabbari filed a Wells Fargo class action lawsuit accusing the bank of opening unauthorized accounts in its customers’ names.

Jabbari accused Wells Fargo of imposing sales goals on its banking sales personnel that were so onerous as to be practically impossible to satisfy without committing fraud. Bank employees who failed to sell an adequate number of bank products faced disciplinary action from bank management, he claimed.

To satisfy these extreme goals and preserve their standing with their employer, Jabarri claims bank employees began opening new accounts in the names of existing bank customers without their knowledge or consent.

Litigation over the unauthorized account openings exploded. By the time Jabbari reached a settlement with Wells Fargo this past spring, the company faced 11 other class action lawsuits over the same or related allegations.

Through coordination among all the parties, this single Wells Fargo class action settlement was drafted to resolve the claims in all these class actions. The initial Wells Fargo settlement provided for a settlement fund of $110 million to compensate affected bank customers.

Wells Fargo agreed this past April to expand the proposed settlement terms. Judge Chhabria’s order gives the parties 14 days to submit revised settlement terms.

The Wells Fargo Fake Bank Accounts Class Action Lawsuit is Jabbari v. Wells Fargo & Company, et al., Case No. 3:15-cv-02159, in the U.S. District Court for the Northern District of California.

UPDATE: On July 8, 2017, the $142 million Wells Fargo class action settlement was preliminarily approved by a California federal judge. 

UPDATE 2: September 2017, the Wells Fargo unauthorized bank accounts class action settlement’s website has been established. Click here to learn more about what the settlement provides to Class Members. 

UPDATE 3: On May 30, 2018, a California federal judge granted final approval for a $142 million class action settlement over claims that Wells Fargo opened fake bank accounts, despite many arguments that the settlement is insufficient.