Wells Fargo Faces Fewer CFPB Complaints as Lawsuits Loom

By Jeff Bater and Chris Bruce

Consumer complaints against Wells Fargo have returned to levels reported before last September’s fake account scandal, although the risk of litigation could linger for years.

The Consumer Financial Protection Bureau database logged half the number of complaints against Wells Fargo in February compared to those recorded at the height of the bogus accounts scandal that rocked the bank last fall.

Announcement of the scandal Sept. 8 touched off a loud outcry against Wells Fargo, including immediate congressional hearings that ultimately helped prompt CEO John Stumpf’s resignation.

That month, the CFPB database logged 1,592 complaints against the company, which settled accusations of secretly opening unauthorized deposit and credit card accounts with federal regulators and the city of Los Angeles for $185 million. By contrast, the database logged 914 complaints in December, 948 in January, and 775 in February.

“A decline in consumer complaints ideally indicates that at least while the whole world is looking, Wells Fargo is playing politely in the sandbox,” Bartlett Naylor, financial policy advocate at Public Citizen, said in an email to Bloomberg BNA.

A spokesman for Wells Fargo, Ancel Martinez, said the bank is “committed to rebuilding trust by making things right, fixing the problems, and building a better bank.”

“We remain focused on providing the accountability and oversight that customers, team members, and investors expect and deserve,” Martinez said. “We also take the need to address each allegation very seriously and we are working at every level to diligently respond to, investigate and resolve any issues related to improper sales practices.”

1 Million Class Plaintiffs?

The drop in consumer complaints is one bit of good news for the bank, which continues to face other fallout from the scandal. Credit-card applications at Wells Fargo fell 55 percent in February, compared to a year ago, the bank announced March 20.

The bank also continues to face a growing roster of lawsuits related to the fake accounts. At the moment, ground zero for the consumer litigation is the U.S. Judicial Panel on Multidistrict Litigation, a special judicial body that will hear arguments March 30 on whether to centralize pre-trial handling of 10 major would-be class cases originally filed in various district courts around the nation.

Lawrence J. Mitchell, the lead plaintiff in one of those cases, in late December 2016 asked the MDL Panel to transfer those cases to the U.S. District Court for the District of Utah, which is already hearing Mitchell’s case.

If the request is approved, a judge in the Utah federal court would combine, for pre-trial purposes, all 10 cases. Those cases assert claims arising from fraudulently opened accounts by Wells Fargo starting as early as 2005. Any newly filed cases asserting similar claims would be rolled into that proceeding as well.

Mitchell’s original complaint, filed in September 2016, said his case could include as many as 1 million class plaintiffs. The lawsuit alleged violations of Utah law and federal law, sought compensatory, statutory and punitive damages, and asked for clawbacks of compensation paid to several Wells Fargo executives.

The plaintiffs in the Mitchell case are presented by Zane L. Christensen and Steven A. Christensen of Christensen Young & Associates in Sandy, Utah. In an email to Bloomberg BNA, Zane Christensen said Wells Fargo “needs to be held accountable by the consumers that they hurt.”

“Wells Fargo is not too big to fail, and individuals are not too small to protect,” he said.

Employment, Securities Suits

The account-opening controversy has sparked other cases as well, from employment battles to securities lawsuits. Some of those also are being combined, though not in the MDL process.

For example, in December, Judge Jon S. Tigar of the U.S. District Court for the Northern District of California ordered consolidation in his court of 10 shareholder derivative actions brought by pension funds and other investors.

Wells Fargo March 17 moved for dismissal, saying the plaintiffs failed to make a demand on Wells Fargo’s board of directors to investigate their claims as required by Delaware corporation law. They also failed to show that any such demand would have been futile.

“The Complaint is long on dudgeon and profligate in its accusations of Director wrongdoing and knowledge,” lawyers from Sullivan & Cromwell and Arnold & Porter Kaye Scholer said. “But it fails to allege particularized facts showing that the Directors knowingly breached their duties to Wells Fargo. The Complaint should be dismissed.”

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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