Wells Fargo has reached a $57 million settlement in a Fair Credit Reporting Act lawsuit over how it reported mortgage forbearances during the COVID-19 pandemic, which led to issues with the credit scores of borrowers.
According to the proposed settlement and court filings, the bank agreed to pay $56.85 million to resolve claims that it improperly furnished credit information on certain mortgage accounts that were placed into CARES Act forbearance. The settlement was preliminarily approved by a California Superior Court judge in San Diego, with a final approval hearing scheduled for April 17.
The lawsuit alleged that during the early months of the pandemic, Wells Fargo placed some borrowers into mortgage forbearance after they communicated financial hardship or potential hardship. Under the CARES Act, lenders were required to report accounts that were current at the time of forbearance as current to consumer reporting agencies. The complaint asserted that Wells Fargo inaccurately reported certain accounts that had been placed into forbearance, which could have negatively affected borrower credit profiles.
Court documents indicate that the settlement class is limited to borrowers with California properties who received CARES Act forbearance on or after March 27, 2020, and whose accounts were current at the time the forbearance was applied but were reported to credit bureaus as in forbearance or similar status. The agreement provides for notice to affected consumers and the distribution of settlement funds following final court approval.
Wells Fargo did not admit wrongdoing as part of the agreement, but the settlement resolves claims tied to how mortgage forbearance data was furnished to consumer reporting agencies during the pandemic period.
