Legal issues continue to trouble Wells Fargo & Company (WFC). Following the recent $1.5 million fine by the Financial Industry Regulatory Authority (‘FINRA’) for failure in the anti-money laundering (AML) procedures, the bank has been hit with $54.8 million damages verdict in a class action pertaining to overcharged fees.
The class action brought by homeowner Joseph Mazzei and a group of borrowers in 2001, accuses Wells Fargo of charging late fees unlawfully by the now-defunct mortgage companies – The Money Store and HomEq. Mazzei alleged that borrowers were charged monthly late fees even when such mortgages moved into a default status.
According to the plaintiffs, these late fees were prohibited as per the standard loan agreement. Also, it constituted violation of state laws. Per an October filing, the plaintiffs were seeking to recover around $629 million for alleged overcharges.
The amount of $54.8 million will be divided among the class at a date scheduled for later, provided the verdict stands.
Notably, Wells Fargo did not own the mortgage companies. In 2008 Wells Fargo acquired Wachovia that had owned HomEq. The Money Store, which later became part of Wachovia, was previously owned by First Union.
Per a lawyer for the plaintiffs, “The jury sent a strong message to banks that they must abide by the agreements they make and be transparent and honest in their dealings with borrowers, particularly when those borrowers are trying their best to make their mortgage payments and stay in their family homes.”
However, Wells Fargo is in disagreement with the jury verdict and intends to move for further court review.
Currently, Well Fargo carries a Zacks #3 (Hold). Some better-ranked stocks in the finance space include Great Southern Bancorp Inc. (GSBC), Middleburg Financial Corp. (MBRG) and Cowen Group, Inc. (COWN). All three stocks sport a Zacks Rank #1 (Strong Buy).
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