Wells Fargo & Company (WFC - Free Report) plans to pay about $386 million in order to settle a class-action lawsuit filed by customers in 2017, accusing the bank of forcing unwanted auto insurance, without their knowledge, at the time they took car loans.
The lawsuit had stated that rise in expenses due to the insurance pushed roughly 270,000 Wells Fargo customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions.
The bank, which had denied of any wrongdoing, is still going forward with the settlement in a bid to avoid additional risks, cost and distractions of litigation.
The proposed settlement, which was filed in the federal court in Santa Ana, CA, awaits judges’ approval. Per the filing, National General, an auto insurance underwriter, will pay an additional $7.5 million.
The bank acknowledged the move to be “an important step” toward making things right for customers. Wells Fargo will be sending individualized letters to customers that will clearly state the remediation amount they will receive along with a check for that amount.
Recently, Wells Fargo announced a major overhaul in the commercial banking business structure and several leadership changes. Also, it created a separate strategic execution and operations unit, via which the bank expects to better meet the demands of several unsatisfied regulators and compliance officers. Involvement in such restructuring activities reflects the bank’s commitment to improve performance.
However, post break-out of the sales scandal, Wells Fargo continues to suffer from several sanctions, including a cap imposed by the Federal Reserve on asset growth in early 2018. The mortgage business continues to witness a decline in revenues as mortgage originations and refinancing activities have slowed down due to a higher interest rate environment.
In six months’ time, shares of Wells Fargo have lost 4.5% against 6.5% growth recorded by the industry.
Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
Citigroup (C - Free Report) has witnessed 2.4% upward estimate revision over the past 60 days. Also, the company’s shares have risen nearly 15% in the past six months. It has a Zacks Rank #2 (Buy) at present.
BankUnited’s (BKU - Free Report) earnings estimates for the current year have been revised 2.5% upward over the past 60 days. Also, the company’s shares have risen 5.5% in the past six months. It carries a Zacks Rank #2.
The Zacks Consensus Estimate for JPMorgan Chase & Co.’s (JPM - Free Report) earnings for the current year has been revised 3.6% upward over the past 60 days. Also, the company’s shares have risen nearly 8% in the past six months. It currently carries a Zacks Rank of 2.
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