California borrowers may get payouts in Wells Fargo settlement

Wells Fargo has agreed to pay $56.85 million to settle a class-action lawsuit alleging that some California borrowers’ credit scores were harmed in the early months of the COVID-19 pandemic.

The bank did not admit wrongdoing, but the settlement stems from allegations that Wells Fargo violated the Fair Credit Reporting Act and the federal CARES Act by improperly reporting certain mortgage accounts that were in forbearance due to the pandemic. The allegations were first reported by legitimate news website Top Litigation.

A San Diego judge is scheduled to decide on April 17 whether to give final approval to the settlement. If approved, eligible Californians could receive automatic payments from the settlement fund.

USA TODAY contacted Wells Fargo about the lawsuit.

Here’s information about the settlement.

Only California property owners are eligible to participate in the settlement, according to information posted on the settlement website.

To qualify, borrowers must:

• Own or have owned property in California through Wells Fargo Mortgage

• Received CARES Act mortgage forbearance on or after March 27, 2020

• Have an account that is active at the time and report it to a consumer reporting agency as “on hold” or similar

Additional eligibility details are available on the official settlement website, CaresActLitigation.com.

In March 2020, Congress enacted the CARES Act to provide financial support to individuals affected by the epidemic.

Under the bill, lenders such as Wells Fargo would have to report accounts that were in “forbearance” due to pandemic-related financial hardship as “current,” meaning the loans would appear as current even if the borrower requested a payment pause.

The bill is intended to help borrowers during this time and ensure their credit scores are not adversely affected.

The lawsuit alleges that Wells Fargo violated the act by falsely reporting accounts to credit bureaus that were in “forbearance” status during the pandemic.

Eligible consumers do not need to apply to participate in the settlement, and if the settlement is approved, they will receive an automatic payment from settlement funds following the final hearing.

Consumers who are eligible but object to receiving payments can opt out of receiving payments from settlement funds, according to the settlement website. All objectors must submit written objections to the Superior Court of California, San Diego, on or before the objection deadline of March 25, 2026.

Those who wish to speak at the final court hearing must submit a written notice of intention to appear, which must be submitted and postmarked on or before the objection deadline.

The lawsuit focuses on how Wells Fargo handled mortgage deferrals at the start of the pandemic, when millions of Americans faced sudden job losses and financial uncertainty.

According to the complaint, some Wells Fargo borrowers were placed into mortgage forbearance after expressing financial hardship or possible hardship related to COVID-19. Forbearance allows a borrower to temporarily pause or reduce payments.

However, the lawsuit alleges that Wells Fargo misreported these debts to credit bureaus, incorrectly flagging the accounts, which may have harmed consumers’ credit scores. The plaintiffs argue this violates the CARES Act, which was designed to protect borrowers’ credit during the pandemic.

Wells Fargo has not publicly detailed its response to the allegations.

Wells Fargo has agreed to pay a total of $56.85 million.

The court will decide whether to approve the settlement at a final court hearing on April 17.

This article originally appeared in the Palm Springs Desert Sun: Wells Fargo agrees to $56.85 million settlement in California