Wells Fargo has reached an agreement that will see it pay $50 million to settle a class-action suit brought against on allegations of that the embattled U.S. bank overcharged numerous homeowners for appraisals.
If approved by an Oakland, Calif. court, the settlement will call for the lender to mail checks to some 250,000 homeowners across the nation whom it had allegedly cheated through unusually high home appraisal charges. Customers qualified for checks are those whose home loans were serviced by Wells Fargo from the period 2005 to 2010.
The checks are to be distributed in 2017, if approved by a judge.
Homeowners who default on mortgage loans are typically charged a fee for an appraisal, also known as the broker price opinion, of the current value of their homes. Wells Fargo was accused in the lawsuit filed in 2012 of using a subsidiary of the bank for these appraisals while also inflating the cost.
Homeowners were charged between $95 and $120 per appraisal, according to the suit, even though the National Association of BPO Professionals put actual cost at $30 or less.
The complaint stated that these appraisal fees were usually hard to detect because they were given vague descriptions, such as “other charges” or “other fees.”
Roland Tellis, a lawyer with the law firm Baron & Budd which represented the homeowners, said checks will be for around $120 for each of the affected customers.
“People who are behind on their loans are the people who can least afford to be charged marked-up fees, but unfortunately, that’s exactly what happened,” Tellis said.
Wells Fargo has backed its procedures and disagreed with claims made in the lawsuit.
“While we believe our practices related to Broker Price Opinions were proper and disagree with the claims in the lawsuit, we have agreed to settle the matter to avoid further litigation,” spokesman Tom Goyda told USA TODAY.
The Wells Fargo spokesman said the settlement will cover payment to class members as well as attorney fees and legal costs.
The home appraisal overcharge lawsuit was just one of the legal battles Wells Fargo has been drawn into. Just recently, a scandal broke out over the bank’s sales strategy. Its employees were alleged to have opened as many as two million accounts without customer authorizations in a bid to meet sales target.
That scandal has put the bank under intense scrutiny, with some outraged customers moving accounts elsewhere. The lender has been questioned by both lawmakers and prosecutors on the sham account openings.
Senator Elizabeth Warren has been especially critical of Wells Fargo for its role in the sham-account scandal. The Democrat lawmaker, who represents Massachusetts, has also questioned the role of the bank’s independent auditor KPMG for failing to detect illegal activities in its audits.
In a survey by CG42, about 14 percent of 1,000 Wells Fargo customers said they had decided to move their accounts to another bank following the scandal. The advisory firm estimated that the unauthorized account openings could cost the San Francisco-based lender $99 billion in deposits and cause a $4 billion loss in revenue.