A federal judge granted final approval for a $110 million settlement in a shareholder lawsuit accusing Wells Fargo's board of directors of breaching their duties regarding discriminatory hiring and lending practices.
"This program at least provides an exceptional amount of hope for a lot of people who did not think the American dream would be available to them under these economic times... when I see gold standard, I know it when I see it and this is it," Judge Trina Thompson of the U.S. District Court in the Northern District of California said at the hearing, calling the settlement "historic."
Under the agreement, Wells Fargo will create a $100 million Borrower Assistance Fund for mortgage assistance to low- and moderate-income borrowers. An additional $10 million will be paid by the insurers of the board's directors to the bank. The lawsuits stemmed from 2022 reports alleging sham job interviews with minority candidates and significant disparities in mortgage refinancing approval rates for Black homeowners.
The settlement resolves the consolidated derivative litigation, In re Wells Fargo & Co. Consolidated Derivative Shareholder Litigation, which combined several shareholder suits. The resolution allows the bank to address claims that its board failed to properly oversee discriminatory practices and that it repurchased shares at prices inflated by misleading public statements about its diversity efforts.
Mark Molumphy, a partner at Cotchett, Pitre & McCarthy, one of the co-lead counsels for the plaintiffs, said the settlement will provide real support to individuals who have faced financial discrimination. "Home ownership is a cornerstone of the American dream and has even more profound benefits for families from historically underserved communities," Molumphy said.
The case moved forward after the court largely denied motions to dismiss in September 2024, allowing shareholders to proceed with claims of fiduciary duty breaches and securities fraud against the directors. The settlement was negotiated as a 2026 trial date approached.
The settlement provides a path for Wells Fargo to address reputational damage from the 2022 allegations. Investors will watch how the Borrower Assistance Fund is implemented and whether it helps restore trust with marginalized communities and regulators.
This article is for informational purposes only and does not constitute investment advice.
