Wells Fargo Financial Settles Subprime Mortgage Lawsuit

Wells Fargo Financial, Inc., the consumer finance subsidiary of Wells Fargo & Company, and the law firms of Cotchett, Pitre & McCarthy (Burlingame, Calif.) and Miner, Barnhill & Galland, P.C. (Madison, Wisc.) said they have agreed to settle a class action lawsuit. The two firms filed suit over the nonprime mortgage lending practices in California of Wells Fargo Financial.

Settlement of the lawsuit, filed in December 2003 in San Francisco Superior Court, is subject to approval by that court. Class members are certain California customers who entered into real estate-secured loans with Wells Fargo Financial between Dec. 18, 1999 and Nov. 20, 2005.

In the proposed settlement, Wells Fargo Financial commits to continue for three years several improvements it had already put into practice, which have further strengthened its nonprime real estate-secured lending practices, and to implement other practices to benefit its customers. It also agrees to enact a default relief program, earmarking $2.4 million to provide relief to qualifying class members whose loans have become delinquent by more than 60 days. Qualifying class members who submit claims may also be entitled to cash payments, which will be determined using a formula to disburse up to $4.4 million.

The Association of Community Organizations for Reform Now (ACORN), a party to the lawsuit, had alleged that Wells Fargo Financial failed to adequately disclose points and prepayment penalties and had inaccurately reported loan balances on some of its California customers to credit reporting agencies. Wells Fargo Financial said it has always had good nonprime lending practices and in recent years has made numerous improvements to make them even stronger. All parties to the proposed settlement agreed these improvements are in the best interest of borrowers and have further strengthened Wells Fargo Financial's service to nonprime borrowers.