Wells Fargo class action claims bank underpaid interest in cash sweeps program

Wells Fargo class action lawsuit overview:

• Who: Plaintiff Darren Cobb filed a class action lawsuit against Wells Fargo & Co., Wells Fargo Bank NA and Wells Fargo Clearing Services LLC.
• Why: Cobb alleges that Wells Fargo shortchanges customers by sweeping uninvested cash into accounts bearing unreasonably low interest rates.
• Where: The Wells Fargo class action lawsuit was filed in California federal court.

A new Wells Fargo class action lawsuit alleges the bank underpays interest to customers enrolled in its cash sweep program, enriching the bank at its customers’ expense.

Plaintiff Darren Cobb claims the bank breached its fiduciary and contractual duties by paying “miniscule” interest rates to consumers even after interest rates began to rise.

Brokerage firms use cash sweep programs to move customers’ uninvested cash into an interest-bearing account to generate returns for the client, the Wells Fargo class action lawsuit says.

Despite the fact Wells Fargo is required to act as a fiduciary in its clients’ best interests, Cobb claims the bank invested its clients’ swept cash into accounts with exceedingly low interest rates, enabling it to enrich itself as interest rates rose.

Wells Fargo cash sweeps benefit bank, not customers, lawsuit says

Cobb notes the yield on short-term U.S. Treasury bills has been above 5.25% for most of the year. However, Wells Fargo cash sweep accounts allegedly paid an interest rate of only 0.15% for much of 2023.

“That is more than 36 times less than the short-term Treasury Bill rate at this time,” Cobb says in the lawsuit. Currently, the bank pays account holders just 0.02% interest on swept cash, which is allegedly “more than 234 times less than the prevailing short-term Treasury Bill yield.”

The Wells Fargo class action lawsuit alleges the bank sweeps customers’ uninvested cash into affiliated and unaffiliated banks. Wells Fargo allegedly directs unaffiliated banks to pay the same meager interest rate as its affiliated banks. As a result, Wells Fargo earned hundreds of millions of dollars on swept cash due to rising interest rates, Cobb says.

Cobb asserts claims for breach of fiduciary duty, unjust enrichment, breach of contract, gross negligence and breach of the covenant of good faith and fair dealing.

This Wells Fargo cash sweeps class action lawsuit is just one of the latest to be filed against a bank for allegedly sweeping customers’ cash into unreasonably low interest-bearing accounts.

Are you enrolled in the Wells Fargo cash sweeps program? Tell us about your experience in the comments.

Cobb is represented by Jonathan D. Uslaner, Salvatore J. Graziano, John Rizio-Hamilton, Avi Josefson, Adam H. Wierzbowski and Michael D. Blatchley of Bernstein Litowitz Berger & Grossman LLP and Robert J. Jackson Jr. of Buzin Law PC.

The Wells Fargo cash sweeps class action lawsuit is Darren Cobb v. Wells Fargo & Company, et al., Case No. 3:24-cv-06696, in the U.S. District Court for the Northern District of California, San Francisco Division.

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