In the latest ding to Wells Fargo's reputation, the bank agreed to a $50 million settlement for overcharging customers for appraisals after their mortgages defaulted, and then hid the fees on their statements. Former CEO John Stumpf, pictured testifying before the House Financial Services Committee in September, resigned over the bank's years-long practice of opening accounts for customers who never requested them. File photo by Pete Marovich/UPI | License Photo
SAN FRANCISCO, Nov. 2 (UPI) -- As it continues to reel from being caught opening millions of accounts for customers without their permission, Wells Fargo on Monday agreed to pay millions to mortgage customers for overcharging them on home appraisals.
Wells Fargo agreed to a settlement filed in federal court in San Francisco to pay $50 million to customers whose mortgages fell into default before the bank overcharged them for appraisals to verify the value of the properties.
More than 250,000 mortgage holders will receive checks of approximately $120 starting sometime next year because the bank overcharged them for the appraisals, called a broker's price option. The service generally goes for between $30 and $50, but Wells Fargo charged it's customers as much as $135.
In addition to the mark-ups, the service is usually performed by independent appraisers, whereas Wells Fargo brokers were using a subsidiary of the bank itself. Banks are permitted to recoup the cost of the service, but Wells Fargo was hiding it as "other charges" or "other fees" on mortgage statements.
"People who are behind on their loans are the people who can least afford to be charged marked-up fees, but unfortunately, that's exactly what happened," Roland Tellis, one of the lawyers that represented Wells Fargo customers in the class-action suit, told The New York Times.
The settlement is the latest blow to the bank, whose former CEO John Stumpf resigned from his post in early October after being castigated by U.S. Sen. Elizabeth Warren for allowing sales goals to be accomplished by opening new accounts for customers who never requested them and not informing them.
In a conference call with analysts last month, new CEO Timothy Sloan said the bank will likely absorb more damage from its growing list of scandals before it can start fixing its reputation with customers.
"We're prepared for things to get worse before they get better," Sloan said.