Wells Fargo agrees to pay $300 million to settle with shareholders over auto insurance disclosures
By Jody Godoy
(Reuters) -Wells Fargo & Co agreed to pay $300 million to settle a shareholder lawsuit claiming the bank hid that it had pushed unnecessary insurance on auto loan customers, according to documents filed in U.S. court on Tuesday.
The Construction Laborers Pension Trust for Southern California, which led the class action brought on behalf of investors, said in federal court in San Francisco that Wells Fargo and its former chief executive, Timothy Sloan, had agreed to settle.
The bank did not admit wrongdoing.
The deal requires approval from U.S. Judge James Donato, who is overseeing the case. Trial in the case had been scheduled for Feb. 27.
“While we disagree with the allegations in this case, we are pleased to have resolved this legacy issue,” a Wells Fargo spokesperson said in a statement.
An attorney who represents Sloan did not immediately reply to a request for comment.
Scott Saham of Robbins Geller Rudman & Dowd, the law firm representing Wells Fargo shareholders, said the settlement “is part of remediating the entire spectrum of harm that you get in a complex fraud case.”
The lawsuit stems from one of the San Francisco-based bank’s past scandals over sales practices that resulted in government investigations and fines.
Wells Fargo disclosed in July 2017 that hundreds of thousands of customers had been unnecessarily charged for “collateral protection insurance,” which covers auto lenders when borrowers are uninsured. The bank said it had learned of concerns a year earlier.
Shareholders sued in 2018, alleging Wells Fargo misled them when Sloan said in November 2016 that he was “not aware of any issues” when asked about the bank’s sales practices and culture.
The bank also concealed auto insurance issues from the U.S. Senate Banking Committee in November 2016, the investors alleged.
The lawsuit sought damages for investors who bought Wells Fargo shares between Nov. 3, 2016, and Aug. 3, 2017, the day before the bank disclosed further details.
Wells Fargo settled an auto borrower class action in 2019 for $386 million without admitting wrongdoing.
In 2018, Wells Fargo agreed to pay $1 billion to U.S. regulators to settle probes of its auto insurance and mortgage practices.
(Reporting by Jody Godoy; Editing by Noeleen Walder, Chizu Nomiyama, Nick Zieminski and Jonathan Oatis)