Wells Fargo has agreed to a $56.85 million settlement in a class-action lawsuit that alleges the bank harmed some customers' credit scores during the COVID-19 pandemic.
The lawsuit claims Wells Fargo violated the Fair Credit Reporting Act by improperly reporting mortgage forbearances. These forbearances allowed borrowers to pause or reduce payments during financial hardship.
According to the suit, during the early months of the pandemic, Wells Fargo placed some borrowers into mortgage forbearance. The bank is accused of inaccurately reporting account information to credit bureaus, potentially damaging consumers' credit scores.
A judge in San Diego is set to rule on the settlement's approval on April 17. If approved, eligible customers could receive payments from the settlement fund.
Eligibility is restricted to individuals who own or have owned property in California with a Wells Fargo mortgage. They must have received a CARES Act forbearance on or after March 27, 2020, and their accounts must have been reported as "current" or similar by Wells Fargo to a consumer reporting agency during the forbearance period.
The CARES Act, enacted in March 2020, aimed to provide financial support and prevent harm to credit scores for those affected by the pandemic. Lenders were required to report accounts under forbearance due to pandemic-related hardship as "current."
Eligible consumers do not need to apply for the settlement and will receive an automatic payment if the settlement is approved. Those who object to the payment must file a written objection by March 25, 2026. Those wishing to speak at the final court hearing must also submit a written notice by the same deadline.