Consumer Fraud

Wells Fargo Pays $108 Million For Allegedly Defrauding Veterans

Wells Fargo fraud Wells Fargo Pays $108 Million For Allegedly Defrauding VeteransWells Fargo & Co. has agreed to pay $108 million to settle a whistleblower lawsuit alleging the bank hit veterans with unauthorized fees on mortgage refinance loans and then hid those fees from the government when it applied for federal loan guarantees.

The settlement brings to a close a protracted dispute brought by whistleblowers Victor Bibby and Brian Donnelly, both Georgia mortgage brokers, who sued the bank on behalf of the U.S. government in 2006 under the False Claims Act.

The lawsuit remained under seal until 2011, when federal prosecutors declined to intervene in the case. Mr. Bibby and Mr. Donnelly pressed on with their complaint, arguing that Wells Fargo owed the federal government for claims the government paid whenever one of the improperly guaranteed Interest Rate Reduction Refinance Loans defaulted.

The same pair of whistleblowers had sued eight mortgage lenders to recover similar losses. Bank of America Citigroup, First Tennessee, JPMorgan Chase & Co, PNC Financial Services Group, and SunTrust Banks all settled the allegation in 2012, paying a combined $161.7 million, Reuters reported, citing lawyers for the whistleblowers.

The Wells Fargo settlement is the seventh and largest. Another lawsuit is pending against Mortgage Investors Corp., a St. Petersburg, Florida lender. According to the Atlanta Journal Constitution, in 2013, the lender “laid off hundreds of employees and stopped making new home loans, blaming tougher regulations under the federal Dodd-Frank Act.”

News of this latest settlement broke less than a week after The New York Times reported that Wells Fargo allegedly colluded with National General Insurance to enroll auto loan customers in car insurance policies without the customers’ authorization.

An internal report obtained by The New York Times says the cost of the unneeded insurance policies caused many Wells Fargo customers serious financial harm, pushing more than a quarter million of them into delinquency and causing about 25,000 vehicles to be wrongfully repossessed.

Wells Fargo is also accused of opening millions of unauthorized deposit and credit card accounts for customers and charging fees for those services; wrongfully sticking customers with mortgage rate-lock charges that were the result of Wells Fargo delays; engaging in mortgage fraud that contributed to the 2009 financial crisis; and numerous allegations of retaliation against employees who spoke out against the banks’ misconduct.