Wells Fargo settles class action over mortgages for $94M

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Wells Fargo mortgage settlement overview: 

• Who: Wells Fargo agreed to pay $94 million to settle a class action lawsuit with certain mortgage holders.
• Why: The plaintiffs claimed Wells Fargo automatically put struggling mortgage holders in a forbearance program during the pandemic without their consent.  
• Where: The Wells Fargo settlement was filed in an Ohio federal court.

Wells Fargo agreed to pay $94 million to end claims the bank put the mortgages of borrowers struggling during the pandemic into forbearance without their consent, hurting their credit scores.

Lead plaintiff Brian Echard filed the motion for preliminary approval of the settlement Sept. 9 in an Ohio federal court. 

The Wells Fargo settlement is the result of a nationwide class action filed Jan. 2021 on behalf of customers of Wells Fargo Bank whose mortgages were allegedly placed into Wells Fargo’s Coronavirus Aid, Relief, and Economic Security (CARES) Act Forbearance program without adequate informed consent, the motion states.

Echard and plaintiffs Stephen and Heather Shimp alleged that Wells Fargo breached its contracts and violated the CARES Act and other laws by automatically placing borrowers into forbearance if they contacted the bank and said they were experiencing financial distress during the pandemic. 

A section of the federal CARES Act allowed mortgage holders struggling financially during COVID-19 to ask for a temporary forbearance. 

But the class action alleged Wells Fargo placed those who contacted the bank in forbearance without asking them, negatively affecting their credit. 

Wells Fargo defended itself by saying the bank sought to make sure that every customer who needed help with their mortgage got it in the form of a forbearance, the motion says.

“While plaintiffs had an argument that Wells Fargo’s actions were profit-driven, that argument was far from a certainty,” the Wells Fargo settlement states.

Wells Fargo settlement compensates loan holders

The deal seeks to give about $165 each to owners of about 212,000 loans that were put in forbearance without their consent. 

The remaining $59 million in the settlement would be set aside for those who can claim harm from being placed in forbearance, the Wells Fargo settlement states.

Attorneys seek up to a quarter of the settlement for fees and expenses. The agreement allows named plaintiffs to seek $12,500 in compensation each.

In May, Wells Fargo agreed to a $32.5 million Employee Retirement Income Security Act (ERISA) class action lawsuit settlement resolving claims it mismanaged the company’s retirement plan. 

Were you affected by Wells Fargo mortgage forbearance decisions during the pandemic? Let us know your experience in the comments! 

The plaintiffs are represented by Nathan Andrew Hunter of Hunter & Hunter LLC and Alyssa Koepfgen, Knoll Lowney, Marc Zemel, Meredith Crafton and Savannah Lee Rose of Smith & Lowney PLLC.

The Wells Fargo settlement is Echard v. Wells Fargo Bank NA et al., Case No. 2:21-cv-05080, in the U.S. District Court for the Southern District of Ohio.

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