Two months after a federal court judge tasked with reviewing the pending $142 million settlement for million of fake accounts opened in customers’ names warned he might reject the deal, he finally rubber-stamped the proposal, signaling yet another closed chapter in Wells Fargo’s fake account fiasco.
Judge Vince Chhabria on Saturday gave preliminary approval to the proposed $142 million class-action settlement that would compensate millions of customer who had accounts opened in their names without proper approval. A final hearing for the settlement is set for Jan. 4.
Chhabria noted in his order [PDF] that the settlement is “fair, reasonable, and adequate.”
This description is a stark contrast to Chhabria’s comments in an order issued in May, when he questioned a revision to the number of Wells Fargo account holders affected by the fake account fiasco.
Wait, How Can We Possibly Know How Many People’s Credit Scores Were Affected?
The revision in question came after a memorandum in support of the settlement noted that the total number of fraudulent accounts could be as high as 3.5 million — a huge increase over the 2.1 million figure that has been used since Wells reached its $185 million settlement deal with federal and state regulators in 2016.
Given these revelations, Chhabria questioned the parties’ ability to provide an accurate headcount of the various types of fake accounts that were opened.
“How can the Court be sure that all class members who suffered actual damages will be fully compensated for actual damages?” asked Chhabria, noting that customers whose credit scores were dinged by the fraudulent accounts are a particular concern. “What will the plaintiffs’ counsel request if one of the settlement pools runs out of money for compensatory damages?”
Chhabria’s order and the memorandum of support came just a month after shareholders shed more light on how Wells Fargo employees were able to open so many fraudulent accounts.
In April, Wells Fargo shareholders accused the bank of directing staff to “round up” undocumented laborers from the area in order to hit their internal sales targets.
In a sworn declaration, a former manager from a Wells Fargo branch in Pennsylvania says that when sales began to sag at her bank, upper management began a program dubbed “Hit the Streets Thursdays,” in which Hispanic branch employees were allegedly instructed to “force random people off the streets or from Social Security offices to them into local branches and pressure them into opening new accounts.”
What Will This Mean For Wells Fargo Customers?
Under the recently preliminary approved proposal, all customers who had an unauthorized account opened or submitted an unauthorized application, or who obtained Identity Theft Protection Services from Wells Fargo from May 1, 2002 to April 20, 2017 are covered.
The settlement calls for the creation of an administrator who will issue notices providing information to claimants beginning 60 days from the preliminary approval.
Wells Fargo said in a statement over the weekend that over the next three months it will begin broad outreach to current and former customers, including providing information about the process for making claims.
“This preliminary approval is a major milestone in our efforts to make things right for our customers,” Tim Sloan, Wells Fargo’s President and CEO, said in a statement.
The company says it expects the settlement to “resolve substantially all claims in 10 other pending class actions that alleged unauthorized accounts were opened in customers’ names or that customers were enrolled din products or services without their consent.”