Last year, Wells Fargo ($WFC) admitted to defrauding millions of paying customers. The troublesome bank opened millions of duplicate accounts without their customers knowledge or permission, all for the sake of meeting a quota and padding sales.
This scam, which caught the attention of shareholders and bank customers alike, caused a chain reaction of events. The company’s CEO, John Stumpf, testified in front of congress and subsequently left the company. Many high-ranking bank executives also left the company, albeit with millions of dollars in leaving bonuses. At the same time, thousands of employees embroiled in the scandal were let go, as the company paid millions of dollars to settle each individual case of fraud.
Now, the scandal-happy bank is facing different allegations of fraud. A new lawsuit claims the company added bogus fees and charges without cause to a handful of mortgages, causing lenders to pay more for longer. If the company is found guilty of doing that and more, we could see a repeat of last year’s scandal all over again.
What did Wells Fargo do?
According to a new lawsuit, Wells Fargo allegedly (and illegally) charged bankrupt home owners more than they should. They supposedly did this under the guise of lowering monthly payments, while secretly extending their contract with the company for years, if not decades. The bank normally has to tell a court and gain official approval to make such changes, but apparently didn’t. Dozens of homeowners in bankruptcy are suing the company for deceitful practices and thousands of dollars in extra chargers per mortgage.
The bank claims that the lawsuit is unwarranted and the lenders were notified about the changes. The suit claims the bank did not, in fact, notify lenders, and have been charging them extra since 2015. (For more on the pending lawsuit, read a detailed write-up by The New York Times.)
What does this mean for homeowners?
This scam only applies to homeowners in bankruptcy. If you’re a homeowner in bankruptcy and owe payments to Wells Fargo, you might want to look over your current agreements with the bank, possibly with a lawyer present. You could be owing a lot more than you think.
What does this mean for the company’s stock?
The company’s fake account scandal had a temporary effect on their stock. Investors lost faith when the company owned up to their misdoings and were forced to pay a sizable penalty back to customers. Yet the company’s stock is only down by 1% since the beginning of the year and up 12.78% since this time last year.
Wells Fargo’s stock is currently down by over one percent today as investors react to this news. If the company loses the court case, they’ll likely end up paying significant fines, which could drive their stock down more. Like their previous scandal, such fine will only have a temporary impact on their stock price — unless more allegations of fraud come to light.