Wells Fargo & Co. is now trying to fend off two major lawsuits over their latest scandal. In September, customers filed a class action lawsuit as result of the banker’s unethical cross-selling practices. Wells Fargo’s sales people were setting up credit card account for existing customers without their knowledge or consent.
Wells Fargo is currently attempting to settle these complaints outside of courts. They had agreed to resolve any disputes in arbitration.
The company has also asked for the lawsuits filed in Salt Lake City to be thrown out. A separate judge previously ruled that arbitration agreements can be enforced in a similar class-action lawsuit in Northern California.
Wells Fargo has already agreed to pay $185 million to settle these claims. It also fired 5,300 workers over five years. John Stumpf, chairman and CEO, has resigned because of the scandal.
Class Action Lawsuit On Behalf Of Customers
The plaintiffs in the Utah lawsuit wish to represent other wronged customers in a class action. According to CNN Money, their goal is to recover at least $5 million in damages. The plaintiffs have stated that Wells Fargo should have to pay punitive damages due to its failure to alert customers about the abuses for over a year after it was sued by the Los Angeles city attorney.
Lawsuit Filed By Wells Fargo Employees
Wells Fargo isn’t just under fire from its former customers, they are also facing another class-action lawsuit being brought by two former employees. Alexander Polonsky and Brian Zaghi are two former Wells Fargo employees from Los Angeles. They say they were terminated due to failing to meet unrealistic sales goals. The employees were expected to open 10 accounts per day.
The lawsuit alleges that the employees who refused to participate in the cross-selling scam were “systematically and routinely terminated.” The employees who agreed to participate were often promoted.
The plaintiffs are looking to recover $2.6 billion or more for California employees who were either fired or demoted for refusing to open fake accounts. The suit also alleges that Wells Fargo created a “fraudulent scheme” designed to boost its stock price. Employees were forced to “choose between keeping their jobs and opening unauthorized accounts.”
The Impact On Wells Fargo
Tim Sloan is Wells Fargo’s new CEO. He has promised to “make it right.” In October, he said that the bank’s future approach will be to “err on the side of the customer.” The bank has pledged to refund customers with damaged credit scores as a result of Wells Fargo loans.
Wells Fargo has taken an incredible hit because of this scandal. It’s become much more difficult to court new customers for its retail-banking business. New credit card applications plummeted by half in October with only 200,000 new customers. 44% fewer checking accounts were opened.
In an attempt to repair its broken reputation, Wells Fargo recently launched a new national advertising campaign last month. The purpose of the campaign is to show potential customers that it is taking steps to rectify their mistakes.