Wells Fargo & Co agreed to pay $1 billion to settle a lawsuit accusing it of defrauding shareholders about its progress in recovering from a series of scandals over its treatment of customers, Reuters reports. A preliminary settlement of the proposed class action filed Monday night in a federal court in Manhattan requires a judge's approval. The dollar amount was suggested by a mediator. Wells Fargo has operated since 2018 under consent orders from the Federal Reserve and two other financial regulators requiring that it improve governance and oversight. The fourth-largest U.S. bank is subject to an asset cap by the Fed, which can impede its ability to compete with larger rivals JPMorgan Chase & Co, Bank of America. and Citigroup.
Shareholders accused Wells Fargo of overstating how well it was complying with regulators' orders, and said the bank's market value fell by $54 billion over two years ending in March 2020 as the shortcomings became known. The San Francisco-based bank denied wrongdoing, and said it settled to eliminate the burden and cost of litigation. "While we disagree with the allegations in this case, we are pleased to have resolved this matter," Wells Fargo said. Lawyers for plaintiffs may seek up to 19% of the settlement fund for legal fees. Wells Fargo has since 2016 paid or set aside several billion dollars to resolve regulatory probes and litigation over its business practices. These practices included opening about 3.5 million accounts without customer permission, and charging hundreds of thousands of borrowers for auto insurance they did not need. Chief Executive Charlie Scharf has said repairing the 171-year-old bank founded by Henry Wells and William Fargo has taken longer than he expected when he took over in 2019.