American multinational investment bank Wells Fargo will pay its customers $386 million in an effort to settle class-action claims against it. The claims are filed against the bank because the bank allegedly forced customers to sign up for an unwanted auto insurance during car loan applications, media reports said.
For Wells Fargo, the settlement was ‘an important step in making things right for customers’. Wells Fargo’s auto insurance settlement was disclosed in filings on Thursday with the US District Court in California.
However, the bank denied the claims but said that it agreed to settle to avoid further damage in terms of legal costs and reputation. Reuters reported that the court papers showed that defendants will pay up to $36.5 million for the customers’ legal costs. National General Insurance will pay an additional $7.5 million, totaling the customer payout to at least $393.5 million, the filing said.
The bank also said, “We will continue sending individualised letters to customers that clearly set out the remediation amount due to them, as well as a check for that amount.”
Wells Fargo’s auto insurance claims adds to its 2016 episode of scandals. Now, the bank is trying to gain trust amid its existing and potential customers.
Last year, the bank agreed to pay $1 billion to the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency in order to settle the US investigations of its San Francisco division’s auto insurance and mortgage practices.
Media reports said that the Federal Reserve imposed restrictions on the bank last year withholding it from further expansions. The bank will be able to do so only after it straightens out its practices again.
Wells Fargo is the’ fourth-largest bank by assets in the US.