Wednesday, October 27, 2021

Wells Fargo reaches $37 million settlement in sales scandal

WASHINGTON (CNNMoney) — Wells Fargo agreed on Tuesday to pay $37 million to small and medium businesses that were victims of the bank’s massive scandal over the opening of millions of sham bank and credit card accounts.

The deal with the U.S. Department of Justice marks the latest fallout from Wells Fargo’s 2016 admission that its employees opened up to 2 million accounts that were not authorized by consumers.

The scandal has led to the firing of several hundred employees. Wells Fargo has been still trying to repair its reputation among customers and the business community.

“This settlement proves that we are absolutely committed to carrying out our commitment to doing the right thing for all customers,” John Shrewsberry, executive vice president and chief financial officer of Wells Fargo, said in a statement.

The Justice Department investigation found that some employees falsely created fake accounts and emails without consumers’ knowledge to meet sales quotas and earn more money from bonuses and commissions.

The number of fake accounts was down slightly from the number announced last August, according to an e-mail to employees from Teresa Kotak, a compensation manager at Wells Fargo.

The settlement comes on the same day that Consumer Financial Protection Bureau Director Richard Cordray dismissed doubt about his own job status.

Cordray, who also faces a Democratic primary challenge in his home state of Ohio, told CNN’s Alisyn Camerota on Tuesday that he will remain in his position “until some new person assumes responsibility” for setting policy.

“I am certainly not going anywhere now. I will continue to serve the people of this country as we continue to fight for them every day,” Cordray said.

The Wells Fargo settlement is separate from the $142 million settlement reached last week with $575 million by a team of attorneys general in 17 states, and Washington, D.C. That deal included a $35 million criminal penalty.

Under the terms of the settlement, Wells Fargo will pay $20 million to small and medium-sized businesses that were harmed by the creation of the fraudulent accounts.

The deal also requires Wells Fargo to pay $12 million to homeowners whose properties were foreclosed on after accounts were opened. Additionally, the bank will contribute an additional $2 million to nonprofit organizations that provide technical assistance to small and medium-sized businesses.

Wells Fargo had not previously disclosed the number of affected small businesses, according to a court filing.

The settlement includes the lawsuit that was filed by the National Small Business Association in January 2017, the NSBA said.

The bank still faces several other legal probes. Wells Fargo said this month that it settled a class action lawsuit filed by shareholders over its sales quotas.

In February, the bank received the green light from the Securities and Exchange Commission to reduce the bonuses of about 3,300 senior management employees for breaking sales quotas and customer service standards.

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