Wells Fargo to Pay $185 Million for Unauthorized Mortgage Forbearances

Wells Fargo has agreed to pay $185 million to its customers as part of a class action settlement approved by a court. The settlement stems from a lawsuit filed last year, which alleged that during the Covid-19 pandemic, the bank placed customers into mortgage forbearance programs without their explicit consent. This action reportedly caused unnecessary financial hardship and negatively impacted credit scores due to halted payments.

The lawsuit claimed that Wells Fargo decided to provide mortgage forbearances to certain clients who had made an inquiry or expressed hardship but did not explicitly request a forbearance. The bank did not admit to any wrongdoing but agreed to the settlement to resolve the matter. Customers who had a mortgage placed into COVID mortgage forbearance without informed consent between March 1, 2020, and Dec. 31, 2021, are eligible for compensation. Some customers have already received letters from Wells Fargo regarding the payout.

In an emailed statement, a Wells Fargo spokesperson said, “During the early stages of the pandemic, Wells Fargo worked hard to help customers who expressed concern about financial hardship and their ability to make their next mortgage payments… We support this settlement because we believe it is in the best interests of our customers.”

The settlement highlights the challenges faced by financial institutions during the pandemic and the importance of clear communication with customers regarding financial relief programs. It also underscores the potential legal and financial consequences for banks that fail to obtain explicit consent from customers before enrolling them in such programs. The payout is a significant step towards compensating affected customers and restoring trust in the bank's practices.