Wells Fargo has agreed to settle a class-action lawsuit over how it handled borrowers’ credit scores.
Lawsuit Explained
USA Today reported that, at the start of the COVID-19 pandemic, Wells Fargo placed some borrowers into mortgage forbearance. In March 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which protected those who were financially impacted by the pandemic. The legislation required lenders to report up-to-date accounts that were placed under forbearance as a result of the pandemic as “current,” instead. The move aimed to protect lender credit scores.
The bank is accused of violating the federal Fair Credit Reporting Act, which was created to protect “information collected by consumer reporting agencies such as credit bureaus, medical information companies, and tenant screening services,” notes USA Today.
Wells Fargo was in violation for allegedly reporting mortgage forbearances incorrectly to credit bureaus, claiming they were “in forbearance” rather than “current,” per Top Class Actions. As a result, this could have harmed customer credit scores.
Wells Fargo did not admit wrongdoing, but it has agreed to settle the CARES Act class action lawsuit for $56.9 million, according to USA Today.
Who Qualifies
Qualified settlement recipients must be California mortgage holders whose accounts were marked “current,” who received a CARES Act forbearance on or after March 27, 2020, and whose accounts were reported as “in forbearance” by the bank to a consumer reporting agency, according to USA Today.
How To File a Claim
Those who qualify or believe they will qualify will not be required to fill out a claim form. Instead, class members will automatically receive their portion of the settlement fund unless they exclude themselves, notes USA Today.
Payout Amount
The exact amount of the payout is yet to be determined. Class members will receive an equal share of the net settlement fund, after fees and expenses are deducted, notes Top Class Actions. Class members will have 90 days to cash in their portion from the fund.
Funds remaining after the first round may lead to a second round of payments. If the remaining funds are insufficient to permit this course of action, they will be donated to the nonprofit organization Credit Builders Alliance, per Top Class Actions.
When Will Payment Be Distributed
A judge will decide whether to approve the settlement on April 17, which would allow class members to begin receiving payments from the settlement fund, reports USA Today.
Deadline
The deadline to file for exclusion and objection is March 25, 2026. However, you do not need to file any paperwork to be included in the settlement.
For more information, visit the settlement website.
