Wells Fargo & Co has recently announced that it has received an initial approval for the settlement of a class-action suit from millions of possible customers whose information was used to open unauthorized accounts.
The bank announced last week that it will be having a capital return plan after the Federal Reserve’s annual stress test. The banking company will be raising its dividends from 39 cents per share to 39 per cents per share beginning this quarter. Although it only raised its dividend marginally, the company will be placing a new share repurchase program of up to $11.5 billion until the second quarter next year.
Some have raised their concern regarding this as the company is currently in the middle of a class action suit from the scandal the company was involved in last year.
According to a San Francisco federal judge, the proposed settlement was fair, reasonable and adequate referring to the Wells Fargo’s proposal of a $142 million settlement in compensation for the customers who were involved in the scandal involving the San Francisco-based company.
Wells Fargo’s current chief executive officer and president Tim Sloan stated that they are pleased with the court’s decision and that the preliminary approval marks a major milestone in their efforts in making things right for their customers.
Last year, the company agreed to pay $185 million in fines to regulators following the accusation that it opened millions of unauthorized checking, savings, credit card, and lines of credit accounts without their acknowledgment. John Stumpf who was then the CEO of the company left the company after a month.
Investigations revealed that the company’s management forced its employees to reached seemingly high sales quotas. Although the scandal was only revealed last year, internal investigations showed that the unauthorized accounts were started to be opened since 2002.
The bank originally stated that it would provide $110 million in compensation based on the amount regulator shave imposed. The company will now determine which customers will be compensated and to whether those whose credit image has been tainted due to unwarranted credit card accounts.
Should the settlement proposal be given a final approval by the U.S. District Judge Vince Chhabria, the bank would be able to remove the scandal from its ongoing list of troubles and would stop any further issues in connection to the scandal from popping up and attacking the company further. Although the company is still facing a series of investigations and other possible cases from a number of federal, state, and local agencies, the company will be able to close a huge number of 10 class actions lawsuits after the final approval.