Wells Fargo & Co. (NYSE: WFC) has been hit with a class-action lawsuit accusing them of charging unnecessary inspection fees in a New Jersey District Court. This lawsuit comes 13 years after another class-action suit that accused Wells Fargo of the same racketeering activities in Iowa.
What Happened: In a complaint filed on August 5th, Wells Fargo was made aware of official class action litigation against them. Now, they must respond to the claims that they charged mortgage borrowers millions in unnecessary property inspection fees to increase profits.
The suit asserts that when mortgage owners were charged, inspection fees were “hidden” and labeled as “other charges” to avoid detection by mortgage owners. The suit is led by a mortgage owner named Jane Hart.
Hart says that she and other mortgage borrowers were subject to undue “difficult financial straits, putting their homes in jeopardy and, in some instances, resulting in bankruptcy,” at the hands of Wells Fargo.
There is not yet a compensation number attached to the suit. However, for reference, in 2008, Wells Fargo was served with a similar suit that settled for a whopping $26 million dollars. The case, Young v. Wells Fargo & Co. et al., also accused Wells Fargo of making borrowers pay for unnecessary inspections.
Why It’s Important: If the complaint is approved by the court, and the case eventually goes to trial, this will be another blow to Wells Fargo’s already shaky reputation. The bank has become synonymous with scandal.
Just in the past 5 years, Wells Fargo has paid fines of $185 million for the infamous fake accounts scandal, a $1 billion settlement for charging loans without consent, and $5.4 million to a fraud whistleblower: to name a few.
To police Wells Fargo’s scandals, the Federal Reserve imposed a cap on the company’s assets in 2018. As a result, the company is restricted in adding customers and loans. Since then, the company has dropped $220 billion in stock value.
Still, Wells Fargo remains one of the largest American home loan servicers. But to escape this suit, the company will have to beat breach-of-contract, state-law consumer protection, and federal racketeering claims.