Wells Fargo accused of opening 3.5 mn unauthorised accounts
15 May 2017
US bank Wells Fargo & Co may have opened as many as 3.5 million unauthorized or fraudulent customer accounts, far more than previously estimated, according to lawyers seeking a $142 million settlement over what has become a national scandal.
The new estimate provided in a filing in the federal court in San Francisco on Thursday night is 1.4 million accounts higher than previously reported by federal regulators.
The bank reached a $110-million deal in late March to resolve a national class-action lawsuit over claims that employees may have opened more than two million deposit and credit-card accounts without customers' permission since 2011 (See: Wells Fargo & Co agrees to $110-mn deal to settle fraudulent accounts claims).
After the bank last month agreed to expand the accord to include dates as early as May 2002, lawyers for consumers on Thursday raised their estimate of the number of fake accounts.
Keller Rohrback, a law firm for the plaintiff customers, said the higher estimate reflects "public information, negotiations, and confirmatory discovery".
The Seattle-based firm also said the number "may well be over-inclusive, but provides a reasonable basis on which to estimate a maximum recovery".
A consultant Wells Fargo hired to determine how many accounts could have been fraudulent found employees may have opened almost 2.1 million unauthorised accounts from May 2011 to July 2015. Regulators used the consultant's deposit and credit-card account findings when they fined the bank $185 million in September over improper sales practices and a culture that drove employees to create fake accounts.
Wells Fargo spokesman Ancel Martinez in an email said the new estimate was "based on a hypothetical scenario" and did not reflect "actual unauthorized accounts".
Nonetheless, it could complicate Wells Fargo's ability to win approval for the settlement, which has drawn opposition from some customers and lawyers who consider it too small.
"This adds more credence to the fact there is not enough information to assess whether the settlement is fair and adequate," Lewis Garrison, a partner at Heninger Garrison Davis in Birmingham, Alabama who represents some objecting customers, said in an interview.
US District Judge Vince Chhabria in San Francisco is scheduled to consider preliminary approval at hearing on 18 May.
The accounts scandal mushroomed after Wells Fargo agreed last September to pay $185 million in penalties to settle charges by authorities including the US Consumer Financial Protection Bureau.
Wells Fargo employees were found to have opened the accounts in part because of pressure to meet sales goals.
John Stumpf and Carrie Tolstedt, who were respectively the San Francisco-based bank's chief executive and retail banking chief, lost their jobs over the scandal, along with 5,300 employees who were sacked (Fake accounts scandal forces Wells Fargo chief John Stumpf to step down).
The $142-million settlement covers accounts opened since May 2002. Wells Fargo originally agreed to pay $110 million covering accounts since 2009, but boosted the payout after discovering more problems.
Keller Rohrback said the settlement "fairly balances the risks" of further litigation, including the possibility their clients might lose, against the benefits.
Garrison's firm said in a filing the accord underestimated the potential maximum damages by at least 50 per cent, and did not properly address whether Wells Fargo committed identity theft by using customers' personal data to open accounts.