Wells Fargo to Pay Millions of Dollars to Settle Lawsuit Over Mortgage Fees
The bank was accused of overcharging hundreds of thousands of homeowners
Wells Fargo is settling a lawsuit. Again.
Back in September, the bank paid $4.1 million to settle the U.S. Justice Department's charges that it had seized 413 vehicles that were owned by members of the armed forces without a court order in violation of federal law.
Now, Reuters reports that Wells Fargo is paying $50 million "to settle a racketeering lawsuit accusing it of overcharging hundreds of thousands of homeowners for appraisals ordered after they defaulted on their mortgage loans."
The proposed settlement must be approved by a court. If this occurs, it will resolve claims that have come in from across the country accusing the bank of charging much greater amounts than it paid for appraisals from third parties, exploiting borrowers who could not afford the appraisals and driving them even deeper into debt.
Wells Fargo spokesman Tom Goyda said that the bank believes there was nothing improper about its appraisal practices and that it did not agree with the claims made by the plaintiffs, but that it was settling to avoid more litigation.
Roland Tellis, who represented the plaintiffs in the case, said that they are "very pleased to have negotiated a settlement that achieves [their] litigation goals" and that the proposed settlement will cover approximately 250,000 homeowners. According to the San Francisco Chronicle, these homeowners, who all had their loans serviced by Wells Fargo between 2005 and 2010 and paid for the appraisals, could be eligible to receive at least $120 each.
Banks are allowed by mortgage agreements to charge homeowners for an appraisal if the homeowners default on their mortgages. However, the lawsuit claimed, Wells Fargo added large mark-up amounts to those charged by the bank's third-party vendors.
According to the complaint, the bank generally charged between $95 and $125 for the kind of expedited appraisal in question, when the actual cost of the appraisal was $50 or even less. Over time, claimed the suit, hundreds of thousands of dollars were added to homeowners' mortgage loans due to these charges.
The complaint further alleges that the homeowners were unaware that they had been victimized because the charges were assigned such cryptic and ambiguous labels as "other charges" on their statements.
In filing the lawsuit, the plaintiffs had sought triple damages under the Racketeer Influenced and Corrupt Organizations Act. The complaint contended that the practice of sending an invoice and statement with fraudulently-concealed fees constituted mail and wire fraud such that racketeering charges were justified.
Wells Fargo lawyers had denounced these claims in court filings as "far-fetched." They stated that the federal Office of the Comptroller of the Currency and the courts have recognized that fees like those charged by Wells Fargo can include a margin for profit.
Wells Fargo is still recovering from a massive unauthorized account scandal that cost the bank $190 million and prompted Congressional hearings, the firing of 5,300 low-level employees, and the early retirements of former CEO John Stumpf and former director of the Consumer Banking Unit Carrie Tolstedt. The bank is also facing numerous lawsuits filed by former employees, customers, and shareholders as a result of the scandal.