Wells Fargo has agreed to pay $56.85 million to settle a class‑action lawsuit alleging that some California borrowers’ credit scores were harmed during the early months of the COVID‑19 pandemic.
The bank did not admit wrongdoing, but the settlement stems from claims that Wells Fargo violated the Fair Credit Reporting Act and the federal CARES Act by improperly reporting certain mortgage accounts that were placed into pandemic-related forbearance. The allegations were first reported by legal news site Top Class Actions.
A San Diego judge is scheduled to decide whether to grant final approval to the settlement on April 17. If approved, eligible Californians could receive automatic payments from the settlement fund.
USA TODAY contacted Wells Fargo regarding the lawsuit.
Here’s what to know about the settlement.
Who is eligible to receive part of the Wells Fargo settlement?
Only California property owners are eligible to take part in the settlement, according to information posted on the settlement website.
To qualify, borrowers must:
Additional eligibility details are available at CaresActLitigation.com, the official settlement website.
What is the CARES Act?
In March 2020, Congress enacted the CARES Act to provide financial support to individuals affected financially by the pandemic.
Under the act, lenders, such as Wells Fargo, were required to report up-to-date accounts placed under “forbearance” due to pandemic-related financial hardship as “current,” meaning the loan would show as if it were up to date even if the borrower had requested a pause on payments.
The act was intended to assist borrowers during this period and to ensure that their credit scores would not be adversely affected.
The lawsuit alleges that Wells Fargo violated this act by misreporting to credit bureaus accounts placed under “forbearance” during the pandemic.
When is the final day to apply to take part in the settlement?
Consumers who qualify do not need to apply to be included in the settlement and will receive an automatic payment from the settlement fund after the final hearing, if the settlement is approved.
Consumers who are eligible but object to receiving the payment may opt out of receiving a payment from the settlement fund, according to the settlement website. All opposed must file a written objection to the settlement with the Superior Court of California in San Diego, on or before the objection deadline, March 25, 2026.
Those who would like to speak at the final court hearing must file a written Notice of Intention to Appear, which must be filed and postmarked on or before the objection deadline.
What the lawsuit claims
The lawsuit centers on how Wells Fargo handled mortgage forbearance at the start of the pandemic, when millions of Americans faced sudden job losses and financial uncertainty.
According to the complaint, some Wells Fargo borrowers were placed into mortgage forbearance after they expressed financial hardship or the possibility of COVID-19-related hardship. Forbearance allowed borrowers to temporarily pause or reduce payments.
However, the lawsuit alleges that Wells Fargo misreported those forbearances to credit bureaus, incorrectly flagging accounts, which may have damaged consumers’ credit scores. Plaintiffs argue this violated the CARES Act, which was designed to protect borrowers’ credit during the pandemic.
Wells Fargo has not publicly detailed its response to the allegations.
How much is the settlement worth?
In total, Wells Fargo has agreed to pay $56.85 million.
A court will decide whether or not to approve that settlement at the final court hearing on April 17.
This article originally appeared on Palm Springs Desert Sun: California borrowers may get payouts in Wells Fargo settlement
Reporting by Julia Gomez, USA TODAY NETWORK / Palm Springs Desert Sun
USA TODAY Network via Reuters Connect
